India’s rupee strengthened to a two-month high as the central bank, bolstered by record foreign-exchange reserves, stepped in to support the local currency through dollar sales.
The rupee gained as much as 0.4% on Tuesday to 94.7988 per dollar, set for the strongest level since July 1. The Reserve Bank of India intervened in offshore and onshore markets right from the start of the session at 9 a.m. Mumbai time, according to traders familiar with the developments.
The support from the central bank’s dollar sales helped the rupee stand out among regional peers, most of which weakened amid renewed US-Iran hostilities and a fresh climb in oil prices. The rupee typically faces strain from higher oil prices, given India’s large dependence on fuel imports.
The moves come after the RBI’s forex stockpile rose to a record $729.3 billion last month, boosted by about $72 billion of inflows from measures rolled out in June to attract foreign capital. As the reserves have swelled, the central bank has become more active in the market, with rupee swings ebbing in August as it quelled volatility. The strategy signals an effort to counter expectations of persistent weakness in the currency, one of Asia’s worst performers for the past two years.
“The pattern of intervention suggests that the central bank is looking to alter importer expectations of rupee depreciation,” said Dhiraj Nim, foreign-exchange strategist at Australia and New Zealand Banking Group.
An RBI spokesperson did not respond to an email seeking comment.
The currency was also supported by firmer-than-expected growth data, traders said. The numbers, released after currency trading hours on Monday, showed India’s gross domestic product grew 7.8% from a year earlier in the June quarter, beating the 7.3% median estimate in a Bloomberg survey and the central bank’s 7% forecast.
“The manner of the RBI’s sales is their way of telling the market to unwind dollar long positions,” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors. “Stop-losses were triggered at 94.90 and the next key level is 94.75,” he said, referring to levels at which traders closed bearish rupee wagers to avoid further losses.
This report is auto-generated from Bloomberg news service. ThePrint holds no responsibility for its content