RBI's heavy FX footprint revives memories of a tightly managed rupee
The dollar sales occurred at multiple price levels, combining brief spurts of aggressive dollar selling with large offers, seemingly aimed at anchoring the rupee above certain levels
The Reserve Bank of India's extensive foreign exchange operations have sparked recollections of a currency that was previously tightly controlled, according to bankers. Despite volatile oil prices and persistent demand for dollars, the rupee has shown limited price movement since last week. State-run banks have consistently sold dollars whenever the currency faced pressure, according to six bankers who spoke on condition of anonymity.
This tactic, involving both aggressive dollar sales and large offers, has helped establish a narrow 30-paise range, with the rupee remaining relatively stable for extended periods despite turbulent oil prices and high dollar demand. The central bank's interventions have been prompted by volatile crude oil prices due to the war in West Asia and the steady demand for dollars from hedging flows.
Despite the macro backdrop suggesting a wider range, the central bank has effectively capped the dollar-rupee pair, reminiscent of the RBI's heavy-handed presence in the foreign-exchange market during the tenure of Shaktikanta Das. India, the world's third-largest crude oil importer, faces higher oil prices as a significant economic risk. The RBI has not commented on the matter.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
