Rupee Strengthens with Central Bank Support
The Indian rupee demonstrated strength in the foreign exchange market, buoyed by intervention from the Reserve Bank of India (RBI). On October 20, the currency opened at 87.9350 per U.S. dollar, showing a slight increase from 87.9750 recorded on the previous Friday.
Rupee Performance and Intervention
Throughout the trading day, the rupee touched an intra-day high of 87.7475. Market analysts attribute this movement to interventions by state-run banks acting on behalf of the RBI. This strategy helped stabilize the currency near the significant 88-per-dollar mark.
- Opening Rate: 87.9350
- Previous Rate: 87.9750
- Day’s High: 87.7475
- Closing Rate: 87.9275
Market Reactions and Dynamics
A senior trader from a state-run bank noted that once the RBI’s intervention seemed to wane, importers began to dominate trading, leading to a 20-paisa appreciation. The RBI had taken proactive measures the previous week, conducting interventions to counteract the rupee’s decline towards record lows. The aggressive dollar sales by the central bank helped alleviate speculative bets and provided a more favorable outlook for the rupee.
Positive developments in equity markets further supported the rupee. In the past week, foreign investors purchased over $1 billion in Indian equities, providing additional momentum. According to Dilip Parmar, a foreign exchange analyst at HDFC Securities, the rupee started the week strong due to favorable risk asset resilience and boosted foreign inflows. He emphasized that the RBI’s measured intervention was a significant factor in the market dynamics.
Interestingly, the currency market showed minimal response to recent comments from U.S. President Donald Trump, who warned of substantial tariffs on India should it fail to cooperate on trade issues.
This environment reflects the growing complexities of international currency markets and the ongoing influence of central bank policies on exchange rates.
