INDIA: The Reserve Bank of India’s increased intervention in the foreign-exchange market is keeping the rupee unusually stable despite volatile oil prices and strong dollar demand, according to bankers and traders. State-run banks have repeatedly sold dollars when the rupee came under pressure, with traders saying the intervention has limited currency movements amid heightened volatility linked to the conflict in West Asia.
The rupee slipped to 95.4775 per dollar in early trading on Monday but remained within a range of about 10 paisa. Traders said the RBI sold dollars during the session, extending its intervention to every trading session since the previous Monday.
Bankers said state-run lenders have offered dollars at multiple price levels, combining aggressive selling with large offers that appeared designed to prevent the rupee from moving beyond certain levels. The intervention helped keep the currency within a roughly 30-paisa range last week, even as crude prices remained elevated and demand for dollars increased.
RBI Intervention Pushes Currency Volatility Lower
The RBI’s actions have sharply reduced the rupee’s recent volatility. Fourteen-day realised volatility fell to around 2% from more than 4% at the beginning of August, despite Brent crude remaining near $90 a barrel. India, the world’s third-largest oil importer, remains particularly exposed to higher crude prices because elevated energy costs can increase pressure on its external accounts and currency.
The intervention has revived comparisons with the tenure of former RBI Governor Shaktikanta Das, when the central bank was widely viewed as maintaining a strong presence in the foreign-exchange market and frequently intervening to smooth movements in the rupee.
The RBI did not immediately respond to a request for comment. Analysts expect continued intervention as global oil prices and geopolitical tensions create pressure on the currency. Axis Bank expects the rupee to trade between 94.50 and 96.00 per dollar through the end of September.
The increased market intervention comes alongside stronger dollar inflows following RBI measures aimed at improving India’s balance of payments. Those measures have attracted nearly $57 billion, contributing to foreign-exchange reserves rising above $700 billion for the first time since April.