RBI likely sold dollars in NDF market to keep rupee stronger: Bankers

Two of the bankers said that the RBI had been selling dollars in the NDF market prior to the opening of the onshore over-the-counter markets

Reuters MUMBAI
Rupee dollar

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By Anushka Trivedi and Nimesh Vora

MUMBAI (Reuters) - The Reserve Bank of India has likely been selling dollars in the non-deliverable forward (NDF) market this week to prevent the rupee from weakening past 83 to a dollar, five bankers told Reuters on Friday.

The rupee closed at 82.83 to the dollar after touching a more than one-month low of 82.8975 on Wednesday. The unit, however, has managed to avert a further slide despite a jump in U.S. yields and a broad selloff in Asian currencies.

The central bank's move to sell dollars in the NDF before the open was likely aimed at ensuring that rupee does not fall below 83, the bankers said.

The RBI was assumed to have been defending that level back in December, according to traders.

The South Korean won and the Thai baht are both down around 2.4% each this week. The Philippine peso has lost 1.3%, while the Chinese yuan has declined about 1% in the same period.

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In comparison, the rupee is down 0.3% against the dollar so far this week.

Two of the bankers said that the RBI had been selling dollars in the NDF market prior to the opening of the onshore over-the-counter markets.

None of the five bankers wanted to be identified as their internal policies do not allow them to speak to the media.

The central bank did not immediately respond to a Reuters request for comment via e-mail.

However, the RBI says it does not, as a policy, target any specific level, but intervenes in the foreign exchange market to smoothen volatility and avoid any extreme moves in the currency.

"Public sector banks have been selling in NDF for the past three days, including on Friday, before 9 a.m.," one of the bankers said.

There was no specific level they have sold the dollars at, he added.

Another banker - a spot trader at a private sector bank - confirmed that the RBI had sold dollars this week, but said he was not sure if the central bank was active again on Friday.

"The RBI has been pretty active post New York hours," a currency trader at a Singapore-based hedge fund said, adding that the RBI has been intervening in both onshore and offshore markets.

Central bank Governor Shaktikanta Das had said in September last year the RBI aims to anchor expectations around rupee depreciation.


(Editing by Nivedita Bhattacharjee)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Feb 17 2023 | 5:48 PM IST

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