India rupee weakens in line with Asian peers but RBI help caps fall

Likely intervention by the Reserve Bank of India (RBI) helped the local unit stay away from lifetime lows

By Reuters

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Photo: Reuters
Photo: Reuters

Published: Tue 3 Oct 2023, 11:26 AM

Last updated: Thu 12 Oct 2023, 2:34 PM

The Indian rupee fell on Tuesday as elevated US Treasury yields and broad strength in the greenback weighed on Asian currencies.

However, likely intervention by the Reserve Bank of India (RBI) helped the local unit stay away from lifetime lows.

The rupee was at 22.67 against the UAE dirham as of 9.45am compared with a close of 22.62 in the previous session.

The RBI likely sold dollars in the non-deliverable forwards market, before the spot market opened, five traders said.

"They (RBI) are likely to keep supplying dollars to limit moves to 83.24-83.25 (to the US dollar) levels," a foreign exchange trader at a private bank said.

Dollar sales from foreign banks, related to custodial flows, could also support the rupee, traders said.

With the rupee hovering close to its record low levels over the last few weeks, the RBI has likely been intervening in non-deliverable forwards to stem the pressure on the local unit.

The US 10-year Treasury yield rose to 4.70 per cent, its highest level since October 2007, on Tuesday, amid expectation that US interest rates will stay higher for longer.

The dollar index climbed to 107.19, the highest since November 2022. The Thai baht and Indonesian rupiah lead losses in Asia.

Short positions on the rupee have firmed to their highest since November 2022, according to a Reuters poll.

"It's a bit puzzling what the RBI is doing now," said Anindya Banerjee, head of foreign exchange research at Kotak Securities, referring to the central bank's defence of the currency, despite its relative outperformance in Asia.


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