Mumbai, Aug 31 (Reuters) – India’s central bank stepped in again to support the rupee on Monday, after a surge in oil prices and rising expectations of a U.S. interest-rate hike combined to pressure the currency.
The rupee was quoting at 95.44 to the dollar at 11:49 a.m. IST, down less than 0.1% from Friday. The currency opened weaker at 95.49 and had briefly fallen to 95.60 on the interbank order-matching system before the regular market session began.
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The Reserve Bank of India’s intervention helped the currency recover, extending a pattern seen repeatedly in recent sessions. The central bank’s sustained presence has insulated the rupee from adverse external developments and leaving the currency muted in its response to changes in the factors that would otherwise influence it.
“The RBI was there right from the start,” a currency trader at a private sector bank said, adding that, like several others in the market, he now sees the 95.70-95.80 zone as a key support area for the rupee.
Monday’s muted price action comes despite mounting oil concerns and higher U.S. Treasury yields.
Bent crude rose 3.2% to $90.92 after the latest escalation involving the U.S. and Iran. At the same time, investors increased bets on a Federal Reserve rate hike at its September 15-16 meeting after Fed Chair Kevin Warsh struck a more hawkish tone in a closely watched speech on Friday.
The RBI’s activity was not limited to the spot market. Bankers said the central bank appeared to have conducted dollar-rupee buy/sell swaps in the very short-dated tenures. This helped cool overnight swap rates that had surged in recent sessions because of abundant dollar liquidity from FCNR(B)-related inflows.
The cash-tomorrow swap rate dropped to around 0.75 paisa, after touching a high of 2.8 paisa on a per-day basis on Friday. The tomorrow-spot rate slipped to around 0.60 paisa.
This report is given by Reuters. The Sen Times holds no responsibility for its content.