The Reserve Bank of India likely stepped into the foreign exchange market on Thursday to curb losses in the rupee as the currency approached record lows against the dollar.
Traders indicated that the central bank’s intervention was aimed at limiting the pace of depreciation, which has accelerated in recent sessions.
28 per dollar earlier in the week, marking a roughly 1% decline and its sharpest weekly loss since May.
The rupee has been under sustained pressure, weakening to 96.28 per dollar earlier in the week, marking a roughly 1% decline and its sharpest weekly loss since May. The currency remains vulnerable as traders assess the impact of elevated crude oil prices on India’s import bill and current account balance.
This intervention comes as the central bank faces growing pressure to raise interest rates at its upcoming monetary policy meeting.
Persistent inflationary pressures and a weakening rupee have intensified calls for a tighter monetary stance to stabilize the currency and anchor inflation expectations. Analysts suggest that the Reserve Bank of India may need to balance growth concerns with the need to defend the rupee.
The central bank’s actions highlight the delicate balancing act facing policymakers in emerging markets amid global energy volatility.