RBI intervenes to prevent rupee from hitting 90 against dollar
What's the story
The Reserve Bank of India (RBI) has taken decisive action to halt the fall of the Indian rupee (INR). The intervention follows the currency slipping past a crucial level on Friday, sparking fears it could reach the psychological threshold of 90 against the US dollar. The RBI's steps are intended to stabilize market sentiment and curb further rupee depreciation.
Market response
RBI's intervention stabilizes rupee
The RBI's intervention involved selling dollars on the order-matching platform and in the non-deliverable forward market. This action helped stabilize market sentiment and prevent further depreciation of the rupee. The Indian currency had breached 88.80 on Friday, a level that bankers say was held by RBI for weeks, triggering a wave of pressure expected to continue through this week. The rupee was last seen trading at an all-time low of 89.16 per US dollar on the day.
Potential impact
Trade deal between India and US could stabilize rupee
RBI Governor Sanjay Malhotra had said on Thursday that the rupee's recent weakness was due to high dollar demand. He added that this could ease if India and the US agree on a trade deal. India's foreign reserves provide "ample protection" for the currency, he added. The lack of progress on a US-India trade agreement has further weighed on sentiment, traders said.