The Reserve Bank of India likely intervened in the foreign exchange market on Monday, four traders told Reuters, as uncertainty over the Middle East conflict kept oil prices elevated and sentiment jittery.
The rupee slipped in early trading to 95.49 per dollar, but its losses were contained by dollar sales from state-run banks, most likely on behalf of the RBI, traders said. The intervention comes as the Indian currency faces pressure amid heightened uncertainty in global markets and elevated crude oil prices.
The central bank has intervened in the foreign exchange market frequently over the last week, a move which traders reckon is intended to anchor expectations surrounding the currency. The repeated intervention indicates the RBI is seeking to limit volatility in the rupee as external pressures continue to influence foreign exchange trading.
The latest movement in the currency came against a backdrop of continued concern over the Middle East conflict. Traders said uncertainty surrounding the conflict was contributing to jittery market sentiment while keeping oil prices elevated, adding pressure to the broader market environment in which the rupee was trading.
Oil prices remain a particularly significant factor in the market conditions described by traders. On Monday, Brent crude oil futures were up 0.3% at $88.8 per barrel. The increase in crude prices coincided with the rupee’s early decline, although dollar sales by state-run banks helped contain the currency’s losses.
The traders’ assessment that the RBI was behind the dollar sales points to continued activity by the central bank in the foreign exchange market. While the intervention was not directly confirmed in the source material, four traders independently indicated that the central bank likely intervened through state-run banks.
The frequency of intervention over the past week has also become an important feature of recent currency trading. Traders reckon that the RBI’s actions are intended not only to limit immediate movements in the rupee but also to anchor expectations surrounding the currency.
The rupee’s movement therefore reflects the interaction between domestic foreign exchange management and wider international pressures. Elevated oil prices, linked in the source to uncertainty over the Middle East conflict, are contributing to a jittery market environment, while the RBI’s continued presence in the foreign exchange market is helping to contain pressure on the currency.
For traders, the central bank’s repeated interventions have become a significant factor in assessing the rupee’s direction. On Monday, the currency’s retreat to 95.49 per dollar was moderated as state-run banks sold dollars, with traders saying those sales were most likely conducted on behalf of the RBI.
