🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

India asks banks to stop making large bets against rupee, sources say

Published 10/07/2024, 04:23 AM
Updated 10/07/2024, 05:21 AM
© Reuters. FILE PHOTO: A woman walks past the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India, April 6, 2023. REUTERS/Francis Mascarenhas/File Photo
USD/INR
-

By Jaspreet Kalra and Nimesh Vora

MUMBAI (Reuters) -India's central bank has asked state-run and private lenders to refrain from betting heavily against the rupee in an effort to support the currency which has been teetering near record-low levels for the past three trading sessions, four sources said.

The Reserve Bank of India (RBI) informally communicated the instructions to bankers via phone calls on Monday with the rupee at risk of breaching its record low of 83.9850 per U.S. dollar, the sources said.

The RBI has asked banks to avoid large bets against the rupee and the instructions are a form of "oral intervention" by the central bank, a senior banker at a private bank said.

The news has not been previously reported.

The sources declined to be identified as they are not authorised to speak to the media. The RBI did not immediately respond to a mail requesting comment. Reuters could not ascertain the full list of banks the RBI called.

The central bank steps in occasionally to support the rupee via moral suasion and had last done something similar in early August.

The rupee has been under pressure because of a surge in portfolio outflows, higher oil prices and strength in the dollar after U.S. economic data diminished hopes of large rate cuts by the Federal Reserve.

Overseas investors have pulled out about $4 billion from Indian stocks over the last four sessions while Brent oil prices have climbed to their highest since August, fuelled by concerns of a wider conflict in the Middle East.

But the "central bank has made its intentions clear about defending 84 and is unlikely to allow a breach of it soon", a senior banker at a state-run bank said, referring to the central bank's instructions on Monday.

The RBI has also intervened in the non-deliverable forwards and local spot market, traders said.

© Reuters. FILE PHOTO: A woman walks past the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India, April 6, 2023. REUTERS/Francis Mascarenhas/File Photo

The central bank's defence has meant the rupee has fallen 0.3% over last week while its Asian peers have declined between 0.6 to 2.7% in the same time period.

"We expect RBI to remain an important player and cap any sharp moves in INR both ways," MUFG Bank said in a note on Monday.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.