The Indian rupee was marginally higher on Friday after the central bank likely intervened in the non-deliverable forwards (NDF) market to prevent the currency from slipping to an all-time low.
The rupee was quoted at 83.6200 to the U.S. dollar at 11:18 a.m. IST, up from 83.6550 in the previous session. The domestic currency was expected to dip past its lifetime low of 83.6650 at the open, which it avoided largely due to the central bank’s intervention, according to two traders.
“To me, it definitely seemed like the Reserve Bank of India (RBI) sold (in NDF) in the morning,” a currency trader at a private bank said.
“This would be in line with what they have done several times in the past”.
A trader at a mid-sized foreign bank said expectations of the central bank’s intervention may have played a part in the rupee’s recovery.
The RBI has intervened in the NDF market on many occasions previously, around the time when the local over-the-counter market opens in order to help the rupee, traders said.
“We just have to watch whether the RBI allows the rupee to weaken beyond the 83.6650 level,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
He recommends that exporters hold off hedges and wait for more weakness in the currency.
The RBI’s intervention meant that the weakness in Asian currencies and a recovery in the dollar index did not translate to weakness for the rupee.
