The Indian rupee strengthened to its highest level in about a month after fresh Reserve Bank of India measures and likely intervention by state-run banks eased pressure on the currency.
Mumbai, October 13 — The Indian rupee rose sharply on Tuesday, touching its strongest level in around a month after the Reserve Bank of India introduced additional measures to support the currency and traders reported likely dollar-selling intervention in the spot market.
The rupee climbed to 95.0725 per US dollar in early trade, its strongest level since early September, before trimming some gains to trade around 95.25, still up about 0.5% on the day.
The RBI on Monday widened the scope of a recent cash deposit requirement for foreign-exchange hedges. The measure will now apply to all transactions by banks, including hedging related to their assets and liabilities. The move is the latest in a series of steps taken since Saturday to reduce pressure on the rupee.
The currency had come under stress last week as high oil prices and capital outflows pushed it close to record-low levels. The latest RBI action, combined with likely intervention through state-run banks, helped reverse some of that weakness. Traders said public-sector banks were seen offering dollars, most likely on behalf of the central bank.
However, the new forex measures have also created some uncertainty in the market. Reuters reported that several bankers temporarily stopped quoting dollar-rupee forward prices in the interbank market as they sought clarity on the widened rules. Market participants described trading conditions as nervous following the latest regulatory changes.
The dollar-rupee forward market also saw sharp volatility. The one-year USD/INR forward implied yield moved between 3.62% and 4.02%, compared with 3.83% at the previous close.
The recent gains suggest that the RBI’s combination of regulatory tightening and direct market intervention is helping contain immediate pressure on the rupee. Still, the currency’s outlook will continue to depend on global oil prices, capital flows and how markets adjust to the new forex rules.
