The Reserve Bank of India (RBI) logo is seen inside its headquarters in Mumbai, India, April 6, 2023.Reuters/Francis Mascarenhas/File Photo Acquisition of license rights
MUMBAI (Reuters) – The Reserve Bank of India frequently intervenes in the non-deliverable forward (NDF) market to prevent the rupee from falling to record lows, four bankers told Reuters on Thursday. clarified.
The rupee was at 83.1525 rupees to the dollar as of 11:16 a.m. ET, not far from the all-time low of 83.29 rupees set in October 2022. The currency has largely avoided the depreciation of Asian currencies.
“The central bank intervened against NDFs in the morning (before the local over-the-counter market, the OTC market opened) and did the same yesterday,” said a finance chief at a private bank.
“The aim here seems to be to set the tone for the day and let speculators know they’re there and watching.”
The bank official said the Reserve Bank of India is intervening in the NDF market through BIS (Bank for International Settlements) and major US-based banks.
NDFs are offshore, dollar-settled currency derivatives used by investors with limited access to onshore markets to hedge their exposure and to speculate.
The officials requested anonymity because they are not authorized to speak to the media. RBI and BIS did not immediately respond to Reuters emails seeking comment.
“We have been attacked by the BIS (in terms of trading systems) several times, sometimes with the names of public sector banks (in India),” said the head of proprietary trading at a foreign bank. Ta.
He further noted that the RBI’s intervention was not confined to the Asian session.
“During the New York session, if there is any sign of USD/INR going higher, the RBI will intervene.”
During US trading hours on Wednesday, the 1-month USD/INR NDF rose to 83.44 on strong US services data. This suggests a spot rate of around 83.35.
By the time the local over-the-counter market opened on Thursday, the contract had fallen to 83.20 and the spot opened at 83.12.
Apart from NDFs, the central bank is likely supplying dollars to local over-the-counter markets through public-sector banks, traders said.
Reported by Nimesh Vora.Editing: Savio D’Souza
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