Rupee gains 28 paise as RBI intervenes to curb one-sided bets
Rupee strengthened against the dollar despite equity outflows as RBI intervened aggressively to curb speculation. Central bank dollar sales lifted the currency to a three-week high, made it Asia’s top performer, and signalled tolerance for only li...
RBI intervention drove the rupee higher, offsetting foreign selling, as traders turned cautious ahead of swaps, with analysts seeing a range and scope for appreciation.
The Indian rupee appreciated 28 paise against the US dollar on Wednesday, despite foreign investors selling in domestic equities, as the Reserve Bank of India (RBI) intervened heavily in the currency market to remove speculative positions against the currency.
The rupee closed at 89.88 to $1, versus its previous close of 90.16 to $1, its highest closing level since December 19.
The currency opened at 90.17 to $1 and appreciated to 89.86 per $1, with the central bank intervening at multiple levels throughout the day, traders said. The intervention led to the currency becoming the largest gainer in Asia.
“We have seen that the RBI is not comfortable with an extended one-sided movement in the currency. Today’s intervention removed speculative bets on the rupee and this dip in levels was bought by importers,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors. Currency closes at 89.88 per Dollar The rupee appreciated 0.3% and was the best performing currency in Asia, followed by Japanese yen.
The intervention, to the tune of about $2-3 billion, has prompted traders to be cautious of when these positions by the RBI mature, said a trader with a public sector bank.
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Further mild appreciation towards 89.50 per $1 could happen this month, traders said.
“I expect some appreciation to happen after the USDINR swap next week, as the central bank would get dollars to curb the short-term volatility following foreign fund outflows. The currency had also appreciated last month after the swap and I expect the same this time too,” said Dilip Parmar, currency research analyst at HDFC Securities.
The RBI will conduct a USDINR buy/sell swap on January 13 for $10 billion
“It is difficult to take a call on the rupee's direction at the moment, but 89.50 to 90.50 can be broadly considered as the range for January,” Bhansali said.
