Mumbai: The Reserve Bank of India is believed to have sold U.S. dollars in the foreign exchange market on Tuesday to slow the fall of the rupee, traders said, as the currency hovered close to its weakest level on record.
The rupee slipped near the 91 mark against the dollar during early trade, remaining close to its all time low. Market participants said state run banks were seen offering dollars, a move usually linked to intervention by the central bank. The dollar sales were described as limited, suggesting the RBI was trying to reduce sharp swings rather than defend a specific level.
Pressure on the rupee has been building due to strong demand for dollars from importers and continued foreign portfolio outflows. A firm U.S. dollar globally and concerns over global economic and geopolitical developments have also weighed on emerging market currencies, including the rupee.
Despite the intervention, traders said sentiment around the rupee remains weak. Many expect the currency to stay under pressure in the near term unless there is a clear improvement in capital flows or a sustained pullback in the U.S. dollar.
Earlier this month, the RBI also conducted a 10 billion dollar foreign exchange swap auction, which was heavily oversubscribed. The move was seen as another effort to manage liquidity and ease stress in the currency market.
Analysts say the central bank’s recent actions indicate a focus on controlling volatility and ensuring orderly market conditions, rather than aggressively pushing the rupee higher. For now, the rupee is expected to trade near record low levels as market forces continue to test the central bank’s tolerance.