RBI intervention lifts rupee to strongest one-day gain in over a month

By Pratigya Vajpayee

 

India’s central bank sold dollars in the local currency market, propelling the rupee to its best gain in over a month, according to traders familiar with the transactions. 

 

The Reserve Bank of India’s intervention on Monday was fairly large, with the central bank beginning to sell dollars when the rupee traded near 96.15 per dollar, the people said, requesting anonymity. The rupee rose as much as 0.8% to 95.7838, posting its biggest gain since June 15. 

 

The RBI intervened even as the rupee was already trading higher after crude oil prices fell amid easing geopolitical tensions in the West Asia. Adding to the positive sentiment, RBI Governor Sanjay Malhotra told the Hindu Business Line that the central bank’s recent measures to attract foreign capital had drawn a strong response, with banks mobilizing $32 billion, largely through foreign currency deposits.  

 

“The RBI stepped in when there were already tailwinds from lower crude, a fall in the dollar index, and the Governor’s comments,” said Dilip Parmar, an FX analyst at HDFC Securities Ltd. Interventions on days when other factors are also supportive are more effective in lifting the currency, he added.  

 

The rupee has been under pressure this month as renewed tensions US-Iran tensions pushed oil prices higher, fueling concerns over India’s rising import bill. Despite Monday’s gains, the rupee remains Asia’s second-worst performing currency this month.

 

A spokesperson for the RBI did not immediately respond to an email seeking comment.