The Reserve Bank of India intervened heavily in the currency market on Wednesday to shore up the rupee. Traders noted the move mirrored the central bank’s script from its February defense of the local currency. This aggressive stance signaled the RBI’s intent to stabilize the currency amid mounting pressure.
The RBI stepped in forcefully to stem pressure on the rupee, initiating dollar sales through state-run banks before the usual 9:00 a.m. market open. This early action demonstrated the central bank’s determination to draw a firm line under the rupee’s slide. Market participants observed a clear strategy to counteract speculative forces.
Traders described heavy offers hitting the market within minutes, pushing the dollar-rupee pair significantly lower. The rapid response created immediate impact across trading floors. Currency movements became notably volatile during this period.
There was heavy activity from them in NDF as well as spot market right from open, said VRC Reddy, treasury head at Karur Vysya Bank. Sentiment is expected to change for the rupee following these developments. Market psychology shifted noticeably after the intervention.
The rupee opened at 88.26 to the dollar, well past Tuesday’s level of 88.7975. This opening level represented significant improvement from the previous session. Traders watched closely as the currency found stronger footing.
Tuesday’s level had been only a shade away from the rupee’s all-time low of 88.80. This proximity to historical weakness heightened market tension. The RBI’s intervention came at a critical juncture for currency stability.
Momentum quickly built with stop-loss orders on long dollar positions triggered. These automated trades complemented the RBI’s intervention efforts. The combined effect extended the rally to a high of 87.75 on the interbank order-matching system.
There were not any major flows in the market beyond the central bank’s actions. The pullback on dollar/rupee was entirely RBI-led, with stop-losses amplifying the move, noted a FX salesperson at a foreign bank. This highlighted the singular importance of the intervention.
The salesperson suggested the RBI wanted to flush out speculative shorts that had built up against the rupee. Importers were already reaching out following the drop in the pair. Commercial activity responded quickly to the changing currency dynamics.
The scale and timing of Wednesday’s move bore striking resemblance to February’s aggressive defense. Traders observed familiar patterns in the central bank’s approach. Historical parallels became immediately apparent to market veterans.
Wednesday’s intervention followed several sessions of quiet RBI defense at the 88.80 level. The central bank had been selling dollars intermittently to cap further weakness. This marked an escalation from previous tactics.
The RBI’s pre-emptive move signaled a shift from passive defense to assertive action. This tactical change aimed at resetting market positioning entirely. Central bank strategy evolved in response to market conditions.
Market participants noted the intervention successfully altered short-term currency trajectories. Trading patterns adjusted to account for the RBI’s demonstrated willingness to act. Currency markets recalibrated their expectations accordingly.
The rupee’s recovery from near-record lows demonstrated the effectiveness of coordinated central bank action. Market sentiment toward the currency showed signs of improvement. Traders anticipated continued vigilance from monetary authorities.