RBI Intervenes to Support Rupee Near Record Low Levels

The central bank of India is believed to have intervened in the foreign exchange market on Wednesday to bolster the local currency. This action follows significant dollar demand triggered by the maturity of non-deliverable forwards (NDFs), which the regulator had previously utilized to temper currency volatility. Despite a decline in global oil prices, the rupee remained under pressure, trading near its all-time low. Traders noted that the intervention, likely conducted through state-run banks, helped the rupee maintain a level just above its record low of 93.98 per dollar. The currency was last quoted at 93.96, representing a 0.1% decline for the day. To manage the pace of the rupee's depreciation, the central bank continues to engage in both spot and forward market activities. Analysts at Barclays highlighted the ongoing impact of these financial instruments in a recent market note. > As the NDFs mature, there continues to be demand for USD. The central bank did not provide an immediate response to inquiries regarding its market activities or whether past interventions were currently weighing on the currency's value. Similar liquidity pressures were observed late last month when another round of intervention-linked NDF contracts reached maturity. While the currency faced headwinds, other sectors of the Indian financial market showed resilience. Domestic shares and government bonds strengthened as crude oil prices dropped below $100 per barrel. However, the rupee remained an outlier, with market participants pointing to high dollar demand at the daily reference rate. This benchmark, used for settling contracts, showed a premium of approximately 0.75 to 0.90 paisa, indicating concentrated buying interest. The Nifty 50 equity index climbed 2%, and the yield on the 10-year benchmark note decreased to 6.852%. Broader Asian markets also saw gains following reports that the United States is pursuing a month-long ceasefire regarding its conflict with Iran. Washington has reportedly submitted a 15-point proposal for discussion, sparking optimism that oil exports from the Persian Gulf could soon resume.