By Nimesh Vora and Jaspreet Kalra
MUMBAI (Reuters) -The Reserve Bank of India intervened heavily in the currency market on Wednesday to shore up the rupee, traders said, adding the move was straight from the central bank’s script defending the local currency back in February.
The RBI stepped in forcefully to stem pressure on the rupee, kicking off dollar sales through state-run banks before the usual 9:00 a.m. market open, traders told Reuters, adding that it was a sign of the central bank’s intent to draw a firm line under the rupee’s slide.
Traders described heavy offers hitting the market in a span of just minutes, pushing the dollar-rupee pair significantly lower.
“There was heavy activity from them in NDF as well as spot market right from open. Sentiment is expected to change for the rupee,” said VRC Reddy, treasury head at Karur Vysya Bank.
The rupee opened at 88.26 to the dollar, well past Tuesday’s level of 88.7975 — which was only a shade away from its all-time low of 88.80.
Momentum quickly built with stop-loss orders on long dollar positions triggered, complementing the RBI’s intervention and extending the rally to a high of 87.75 on the interbank order-matching system.
There were not any major flows in the market — the pullback on dollar/rupee was entirely RBI-led, with stop-losses amplifying the move, said a FX salesperson at a foreign bank.
It looked like the RBI wanted to flush out speculative shorts that had built up against the rupee, the salesperson said, adding that importers were already reaching out following the drop in the pair.
The scale and timing of Wednesday’s move, traders noted, bore a striking resemblance to the central bank’s aggressive defence in February, when it had similarly acted to prop up the rupee.
Wednesday’s intervention comes after several sessions of the RBI quietly defending the 88.80 level, selling dollars intermittently to cap further weakness in the rupee, according to traders.
The RBI’s pre-emptive move on Wednesday marked a shift in tactics — from passive defence to an assertive push aimed at resetting market positioning, they said.
(Reporting by Nimesh Vora and Jaspreet Kalra; additional reporting by Dharamraj Dhutia; Editing by Harikrishnan Nair and Janane Venkatraman)
