RBI likely intervened near open to support rupee, traders say

Traders said the Reserve Bank of India likely sold dollars around the opening of the domestic foreign exchange market on Thursday, helping the rupee begin at 96.6825 per dollar. The opening was firmer than market participants had expected as the currency traded close to its all time low of 96.96, recorded in May. The traders' account points to an attempt to limit abrupt weakness rather than establish a new exchange rate level. No figure was disclosed for the size of any dollar sale, and the RBI did not confirm the operation.

Dollar sales by the RBI increase dollar supply and can slow rupee depreciation, which tends to ease imported cost pressure for oil, aviation, chemicals and other import dependent sectors. A steadier currency may also reduce hedging and treasury volatility for banks, while limiting the translation benefit exporters can receive from a weaker rupee. Bank of India ended at Rs 134.69, up 0.8% on the day, but remained down 6.0% over one month and 6.2% over three months, while banks were down 4.0% and 3.4% respectively. It stood 24% below its 52 week high. Sustained currency stability and further evidence of RBI selling would support this reading. Renewed movement toward 96.96 without visible intervention would weaken it.