The rupee traded in a 10-paise band on Wednesday – between 88.57 and 88.67. The Reserve Bank of India (RBI) intervened at the weaker level, dealers said. This presents a sharp contrast to the broad weekly range of 80-100 paise earlier this year.
AgenciesIn sharp contrast to a wider weekly range of 80–100 P earlier this year
The central bank’s short forward position increased $6 billion to $39 billion in September, as it intervened in the onshore and offshore currency markets. This build-up in short positions is seen for the first time in seven months, as the central bank stepped up its defence of the rupee amid tariff-related pressures.
“This (intervention) marks a significant shift in the RBI’s forex policy over the last few months as it earlier advocated a freer movement in the currency,” said Aditi Gupta, economist at Bank of Baroda. “The trend is likely to persist in the coming days as well.”
The rupee has moved between 83.77 and 88.80 in Sanjay Malhotra’s tenure as the central bank governor. Against the dollar, the local unit has retreated 4.4%, reflecting the pressures brought about by punitive tariffs on India, and a relative underperformance of Indian capital markets.
To be sure, the central bank has often reiterated its currency management approach, saying it doesn’t defend or target any particular level for the unit through its interventions, which it says are aimed at minimizing extreme volatility. Hence, the stiff defence of the record low of 88.80 has left market participants wondering about the RBI’s next move.
