Mumbai: The Reserve Bank of India is believed to have stepped into the currency market before trading opened on Monday to slow the rupee’s slide after the currency weakened sharply against the United States dollar.

Traders said the central bank likely sold dollars in the spot market and in the offshore non deliverable forward market to steady the exchange rate. The rupee had touched about 89.50 in early trades but recovered to nearly 89.23 after the suspected intervention.

The rupee has been under pressure for weeks, losing more than four percent so far this year and becoming one of the weakest Asian currencies. Market participants say a mix of foreign investor outflows, a wider trade deficit and global uncertainty has made the currency more vulnerable.

Volatility is also rising. One month implied volatility moved above four percent, a level rarely seen for the rupee. Traders noted that the currency had moved below what many believed was an unofficial level the central bank was defending, which has now pushed markets to expect a new trading band between 88.90 and 90.20.

RBI’s actions on Monday echo similar early morning dollar sales in recent months, signalling its determination to avoid a steep fall in the currency. Analysts say the central bank is trying to prevent a move beyond 90 as that could raise import costs and add pressure on inflation.

The intervention comes as foreign exchange reserves have dropped in recent weeks, suggesting continued efforts by the RBI to stabilise the rupee. Bond markets also reacted to the currency weakness, with the benchmark ten year yield touching a three week high.

Traders and economists will be watching upcoming data on reserves, foreign investment flows and India’s trade balance to understand how much more pressure the currency may face.