RBI Helps Rupee Steady After Striking Record Low Seven Sessions In A Row

Like most Asian currencies, the rupee has been falling as risk aversion has risen on expectations of the US Fed raising rates to curb high inflation and prompting investors to flee riskier assets

The RBI has been intervening in both the spot and forwards markets to slow the rupee's fall and has taken several measures in recent weeks to boost foreign fund inflows.

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The Reserve Bank of India (RBI) on Tuesday intervened in the currency market to help the rupee slightly steady after the unit touched 80.05 per dollar, clocking a record low for a seventh successive session, a report by Reuters said.

Simultaneously, a recovery in the Indian stock markets also favoured the rupee.

Like most Asian currencies, the Indian rupee has been falling in recent months as risk aversion has risen on expectations of the US Federal Reserve raising rates aggressively to curb high inflation and prompting investors to flee riskier assets.

According to the report, the US dollar, too, hovered just above a one-week low reached overnight versus major peers as markets reduced the odds of a percentage-point Federal Reserve rate hike this month.

Reuters reported the partially convertible rupee recovered from the low struck earlier to trade at 79.91/92 per dollar by 0536 GMT compared to its close of 79.97 on Monday.

According to a senior trader at a private bank, “The rupee is going to weaken further, that is a given. But how soon and how much will depend on the RBI.”

The central bank has been intervening in both the spot and forwards markets to slow the rupee's fall and has taken several measures in recent weeks to boost foreign fund inflows.

However, traders said the rupee was being hurt by a severe dollar shortage and expectations that India's current and trade account deficits will continue to widen.

While a recovery in Indian share markets on Tuesday helped stabilise the rupee, traders warned it could be just a temporary respite.

So far in 2022, foreign investors have made net sales of India shares totalling more than $30 billion, and traders said unless this trend reverses, the downward bias on the rupee would continue.

India's benchmark 10-year bond yield rose too, and was trading at 7.46 per cent compared to previous close of 7.44 per cent tracking a rise in US treasury yields.