RBI intervenes to support rupee as it nears record low on oil price surge | Finance News
By Subhadip Sircar and Bhaskar Dutta
India’s central bank stepped into the foreign exchange markets to support the rupee after the currency weakened toward a record low as a renewed surge in crude prices weighed on sentiment.
The Reserve Bank of India sold dollars in both offshore and onshore markets, traders familiar with the matter said, asking not to be identified because they aren’t authorized to speak publicly. A spokesperson for the RBI did not immediately respond to an email seeking comment.
The rupee fell as much as 0.2 per cent to 96.4575 per dollar, putting it back within striking distance of the record low of 96.9650 touched in late May. Benchmark 10-year yields climbed 4 basis points to 6.82 per cent.
Authorities have taken steps to shore up the currency. On June 5, policymakers unveiled measures to attract more foreign currency into the country by easing rules for investments in domestic bonds and encouraging dollar deposits from non-resident Indians. The rupee strengthened to as much as 94.1413 in late June following the announcement, but has since giving up the gains as higher oil prices revived demand for the greenback.
“USD/INR continues to face upward pressure amid higher oil prices and increased importer USD buying,” Barclays Bank Plc strategists including Mitul Kotecha wrote in a note. “The RBI’s recent measures to encourage FCNR inflows appear to be falling short of expectations, though we expect some acceleration in the next couple of month.”
Both the government and central bank have been pushing lenders to intensify efforts to garner foreign currency deposits from the diaspora.
Barclays estimates FCNR-related inflows of $25 billion to $30 billion over the coming months under its base-case scenario, the bank said in a note. That’s below market expectations of about $40 billion to $50 billion.
