RBI Steps Up Intervention in Foreign Exchange Market, Rupee Crosses 96 Threshold

The Reserve Bank of India (RBI) is increasing its intervention in the currency market.

According to Reuters citing banking sources, the RBI sold between $2 billion and $3 billion through large state-owned banks on Thursday, pushing the rupee up by 0.64% in a single day, closing at 96.20 per US dollar; on Friday, it again entered the market to sell dollars, pushing the rupee further past the 96 mark.

The scale of this intervention is clearly higher than before - over the past few days, the RBI has sold about $1 billion per day, and around $500 million had already been sold before the market opened on Thursday, taking advantage of the low liquidity before the market to amplify the effect of the intervention, and using this to suppress the market's one-sided depreciation expectations.

Banking sources have indicated a change in operational strategy: previously, the RBI would only passively supply dollars at market prices, but on Thursday there was a clear intention to actively push up the rupee and deter speculative positions.

The rupee has fallen about 6% so far this year, making it one of the Asian currencies most affected by the war in Iran. Citing a private bank treasury official, Reuters directly stated that the RBI is currently the "only major dollar seller" in the market, and this situation will continue if oil prices do not retreat.

India is the world's third-largest oil importer, and the energy prices driven up by the Middle East war directly translate into a continuous expansion of daily foreign exchange demand from refiners, creating a structural demand for dollars. At the same time, expectations of rupee depreciation are also self-reinforcing - importers accelerate the hedging of forward dollar positions, further intensifying dollar demand.

India's Commerce Minister, Piyush Goyal, said on Thursday that the government is studying several measures to curb the depreciation of the rupee, but no specific plans have been disclosed.