RBI steps in as prior intervention-linked flows pressure rupee near record lows

The Indian central bank likely intervened to support the rupee on Wednesday as heavy dollar demand linked to maturing non-deliverable forwards (NDFs) that it had relied on to manage volatility in the currency, blunting relief from a pullback in oil prices. The likely intervention via state-run banks, ‌traders said, helped ⁠the South ⁠Asian currency hold above its record low of 93.98 per dollar to last quote at 93.96, down 0.1% on the day.

"To prevent a more rapid slide in the rupee, the RBI continues to intervene in the FX market through both spot and forwards. As the NDFs mature, there continues to be demand for USD," analysts at Barclays ⁠said in ‌a note.

The RBI did not immediately respond to a Reuters email seeking comment on whether it had intervened in ⁠the markets and whether flows linked to its previous interventions were weighing on the rupee.


The rupee had confronted similar pressure late last month as well when intervention-linked NDF contracts matured. While Indian shares and government bonds were on a firmer footing as oil prices fell below $100 per barrel, the rupee was the odd one out, with traders also pointing to elevated dollar demand at the ‌daily reference rate, which is the benchmark used to settle contracts.

The reference rate, which often attracts concentrated buying or selling interest, was last quoted at ⁠around 0.75/0.90 paisa premium, signalling heightened dollar buying.

India's benchmark equity index, the Nifty 50 rose 2% while the yield on the 10-year benchmark note eased to 6.852%. Asian equity markets leapt higher on reports that the U.S. is seeking a month-long ceasefire in its war on Iran, and had sent a 15-point plan to Iran for discussion, raising hopes for a resumption of oil exports out of the Persian Gulf.