The Indian rupee closed little changed on Thursday as both weakness and subsequent recovery in the dollar index failed to budge the local unit out of the narrow trading range it has been stuck in this week.
The Reserve Bank of India (RBI) has been intermittently selling U.S. dollars in the non-deliverable forwards, spot, and near-forwards markets to ensure the rupee does not breach the lifetime low of 83.29 hit in October 2022.
“It’s their zone,” a foreign exchange trader at a private bank said, referring to the RBI’s multiple interventions around the 83.24-25 levels in recent sessions.
The rupee closed at 83.25 against the U.S. dollar compared with its previous close of 83.24.
While most Asian currencies gained due to softness in the dollar index early in the session, the rupee stayed under pressure due to U.S. dollar demand from local oil companies and importers, traders said.
The dollar index recovered after falling to a low of 106.5 earlier in the session and was last quoted at 106.8. The 10-year U.S. treasury yield was also lower at 4.73%.
The RBI is likely to have sold dollars near 83.24-25 levels during the mid-day fixing window to stem further depreciation in the rupee, traders said.
The Indian central bank had intervened in every single session this week, they added.
The RBI’s efforts do seem to have successfully deterred some speculators as the number of short bets against the Indian rupee and Chinese yuan declined slightly while they stayed firm on most Asian currencies, according to a Reuters poll.
“The market is slowly pushing it (USD/INR) up,” said Anindya Banerjee, head of foreign exchange research at Kotak Securities, adding that once the 83.29-level breaks, the rupee may depreciate quickly towards 84.
Attention is now on U.S. initial jobless claims data due on Thursday and the RBI’s monetary policy decision on Friday. The Indian central bank is widely expected to hold rates steady but strike a hawkish tone.
