RBI helps Indian rupee stabilize after hitting record low for seven consecutive sessions
India’s central bank intervened in money markets on Tuesday to help stabilize the rupee slightly after it weakened to 80.05 per dollar, recording a seventh consecutive session low. .
Indian shares rebound also in favor of the rupee.
Like most Asian currencies, the rupee has depreciated in recent months as risk aversion has increased on expectations the US Federal Reserve will raise interest rates aggressively to curb high inflation and keep inflation at bay. investors flee riskier assets.
The US dollar is too volatile just above a one-week low hit overnight against major currencies as markets reduce the odds of a percentage point increase in Federal Reserve interest rate hikes this month.
The partially convertible rupee recovered from the previous low to trade at 79.91/92 per dollar by 0536 GMT from its close of 79.97 on Monday.
“The rupee will continue to weaken. But how soon and how much will depend on the RBI,” said a senior trader at a private bank.
The Reserve Bank of India has intervened in both the spot and forward markets to slow the rupee’s fall and has taken several measures in recent weeks to boost foreign capital inflows.
However, traders say the rupee is being hit by a severe dollar shortfall and expect that India’s current and trade account deficits will continue to widen.
While Tuesday’s rally in the Indian stock market helped stabilize the rupee, traders warned it could only be a temporary respite.
So far in 2022, foreign investors have net sold Indian stocks totaling more than $30 billion, and traders say unless the trend reverses, the trend is bearish for the rupee. will continue.
India’s benchmark 10-year yield also rose and traded at 7.46% from the previous close of 7.44% that tracked the rise in US Treasury yields.
