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Rupee pulls back after RBI intervention

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Money & Banking

Rupee up nine paise over the previous close of 77.33

The Reserve Bank of India’s sustained dollar (USD) sales kept the rupee (INR) movement in a narrow range, even as there was demand for the greenback from oil importers.

Thaw in prices of global crude oil and yields of US treasury notes and bonds, and a weak dollar, strengthened major currencies, including the rupee.

The rupee closed at 77.24 per dollar, up nine paise over the previous close of 77.33.

“RBI is controlling the USDINR movement. It is on the opposite side (supplying dollars) and did not allow the rupee to move beyond 77.30.

“The central bank continuously sold dollars at 77.28-77.30 level. Since dollar demand is there in the market, the rupee is not appreciating much,” said the chief forex dealer of a private sector bank.

Besides the spot market, the central bank was also active in the forward and futures market.

“It is believed that the RBI was also hitting the non-deliverable forward (NDF) market. Because of its continuous selling, the rupee’s movement was confined to the 77.1650 to 77.30,” said the official quoted above.

IFA Global, in a report, noted that the USDINR pair ended down on IPO-related inflows and a flat dollar index ahead of US CPI (retail inflation) data.

“Expectations are that a softer CPI print might pause the U.S. dollar’s current bullish trend.

“Oil edged lower, sustaining the previous session’s weakness that was caused by risks to demand from an economic recession and uncertainty about an embargo on Russian oil by the European Union, which supported the rupee,” per the report.

Meanwhile, prices of Government Securities (G-Secs) continued their run up on reports that the central bank may conduct open market (purchase) operations to signal lower yields, which, in turn, can have a salubrious effect on the government’s cost of borrowing.

Price of the 10-year benchmark G-Sec (coupon rate: 6.54 per cent) was up about 58 paise, closing at ₹95.34 (previous close: ₹94.765).

Yield of this security was down about 9 basis points, closing at 7.2153 per cent (7.3015 per cent).

Published on May 11, 2022

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