MUMBAI, Sept 7: The Reserve Bank of India (RBI) has stepped up intervention in the foreign exchange market to contain pressure on the rupee amid rising crude oil prices and heightened geopolitical uncertainty.
Bankers estimate that the central bank sold at least $8 billion last week, with some estimates putting the intervention as high as $15 billion, as authorities sought to stabilise the domestic currency.
The rupee had strengthened to a two-month high of 94.2850 against the US dollar on September 3, supported by substantial dollar inflows. The RBI’s recent measures have also encouraged overseas borrowing and foreign-currency deposits through hedging facilities, helping increase the availability of dollars in the domestic market.
India’s foreign exchange reserves stood at a record $740.8 billion as of August 21, with estimates suggesting they have subsequently crossed $750 billion.
However, the currency continues to face headwinds from elevated energy prices. Brent crude was trading near a six-week high of around $96.6 a barrel on September 7 as tensions around the Strait of Hormuz raised concerns over global oil supplies.
The RBI’s intervention has helped keep the rupee relatively stable. It closed at 94.4850 per US dollar on Monday, remaining almost unchanged from the previous session despite pressure from higher oil prices.
The central bank’s actions are also influencing liquidity conditions in the domestic financial system because dollar sales absorb rupee liquidity. Market participants will closely monitor further currency movements, crude prices and global interest-rate expectations for their impact on India’s external and inflation outlook.