Six traders warned the Reuters news agency that the Indian central bank may be dumping dollars through public sector banks as the Indian rupee (INR) inches closer to a record low.
India selling dollars to save rupee: The Indian rupee was just a hair away from its all-time low of 83.29 at 83.2025 to the US dollar, down from 83.09 at open.
“Hearing of public sector bank names on the offer (on USD/INR), which you would have to think is for the RBI (Reserve Bank of India),” a trader at a private sector bank stated.
According to traders, two sizable public sector banks sold significant amounts of dollars.
Another trader reported that they have received offers for the RBI at “various price points,” and the RBI is currently not adhering to a specific price.
“I wouldn’t be surprise if the rupee reaches a new low even with the RBI. They claim that the selling of dollars is being absorbe without any issues,” he said.
To prevent the rupee from dropping below the 83.29 record low, the Reserve Bank of India has frequently intervened.
Analysts worry that the risk of a sharp collapse in the local currency is growing due to rising oil prices and the dollar index’s advance.
On supply concerns, Brent crude has risen 8.5% this month and roughly 26% so far this quarter.
Increased oil prices may cause India’s oil trade imbalance and overall deficit to grow. Further, At $24.2 billion in August, India’s trade imbalance reached a 10-month high.