RBI, India’s central bank is intervening in all foreign exchange markets. Also, will continue to do so in order to safeguard the rupee. Which hit a new low on Monday according to Bloomberg.
The Reserve Bank of India views its $600 billion in foreign-currency reserves as a powerful stockpile that it will deploy to combat speculators. According to the report, the RBI wants a gradual decline.
The rupee continued to fall Wednesday, falling 60 paise to a new low of 77.50 (provisional) against the US dollar, driven by the dollar’s strength overseas and continuous foreign fund outflows.
Risk appetite has diminished, according to forex traders, as inflation fears grow. Perhaps prompting more aggressive rate hikes by global central banks such as RBI.
Bloomberg reported that the RBI intervened in the spot, futures, and non-deliverable forwards markets on Monday. The RBI believes that a weaker yuan and stronger dollar are putting pressure on the rupee, rather than domestic factors.
India imports roughly 80% of its oil. And rising energy prices threaten to accelerate inflation. And increase the country’s current-account and trade deficits. RBI did issue a statement worrying on the same.
The rupee opened lower versus the greenback on the interbank foreign exchange market. At 77.17, and ended the day at 77.50, down 60 paise from its previous finish.
The rupee hit a lifetime low of 77.52 during the trading session. Moreover, it fell 55 paise to settle at 76.90 on Friday. The rupee has lost 115 paise against the dollar in the last two trading days.
Hence, the RBI will intervene to correct the market failure.