As the Indian rupee (INR) teeters near its all-time low, the country’s central bank, the Reserve Bank of India (RBI), is believed to be intervening by selling dollars through public sector banks, according to information from six traders reported by Reuters news agency.
The Indian rupee began the latest trading session at 83.09 against the U.S. dollar. Still, it quickly slipped to 83.2025, a mere fraction of its historic low of 83.29.
Traders have noted that public sector banks, likely acting on behalf of the RBI, are actively selling dollars in the USD/INR market. Two prominent public sector banks were specifically mentioned as being significant dollar sellers.
One trader pointed out that the RBI offers dollars at various price points without holding steadfast to a specific exchange rate. Despite these interventions, traders express concerns that the rupee could still hit a new low, given the ease with which the market seems to absorb the dollar selling.
The RBI has consistently tried to prevent the rupee from plummeting below the critical 83.29 mark. However, a combination of factors, including soaring oil prices and a strengthening U.S. dollar index, has raised fears among analysts of a substantial depreciation of the Indian currency.
Brent crude, a key global benchmark for oil prices, has experienced an 8.5% surge in the current month and an astounding 26% increase during the current quarter. This rally is primarily attributed to concerns about oil supply disruptions.
The spike in oil prices poses a twofold challenge for India. First, it could further widen the country’s trade deficit, which expanded to a 10-month high of $24.2 billion in August. Second, it may exacerbate India’s deficit, creating additional economic pressures.
The RBI’s proactive stance in stabilizing the rupee amid these challenging conditions underscores the central bank’s commitment to maintaining exchange rate stability. However, the intricate interplay of global factors, particularly oil prices and the U.S. dollar’s performance, will continue to shape the currency’s trajectory in the coming days.