MUMBAI (Reuters) -The Indian rupee rallied sharply in early trade on Wednesday, as heavy-handed intervention by the central bank prompted traders to unwind bearish wagers on the currency, boosting the local unit to a near one-month high.
The rupee rose to 87.9250 in early trading, rising past the 88 per U.S. dollar mark for the first time since mid September. It was last at 88.3250, up 0.5% on the day.
The Reserve Bank of India stepped in forcefully to curb pressure on the rupee, kicking off dollar sales through state-run banks before the usual 9:00 a.m. market open, multiple traders told Reuters.
After defending the currency above its record low of 88.80 for the last two weeks, the RBI appeared to switch gears towards attacking bearish wagers on the currency, an FX trader at a state-run bank said.
The rupee’s sudden rise also prompted both local and offshore market participants to cut speculative wagers against it, adding fuel to its quick-paced rally, the trader added.
The 88.50 was a key stop-loss level for bearish rupee wagers because it was holding for the last two weeks, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
Multiple headwinds, ranging from worries over ongoing trade frictions with the U.S. and a sharp rally in gold prices, have been hurting the rupee over the last few weeks, but the firm intervention is likely to ease some pressure in the near-term.
Elsewhere, the U.S. dollar was on the backfoot after comments from Federal Reserve Chair Jerome Powell bolstered bets for an interest rate cut this month.
Asian currencies and equities were mostly stronger as a dovish tilt from the Fed chief outweighed some of the lingering worries over U.S.-China trade tensions. India’s benchmark equity index, the Nifty 50, was up 0.6%.
(Reporting by Jaspreet Kalra; Editing by Sumana Nandy and Subhranshu Sahu)
