Reserve Bank of India has reportedly directed some major banks to refrain from increasing their current positions against the rupee, as the currency has hit record lows for three consecutive days. This is largely aimed at providing a support ground to the falling currency.
According to a report by Reuters, officials from the central bank's financial market regulation and operations department contacted major banks on Tuesday, as the domestic currency neared 84/$ level in the spot market.
Over the past month, the Indian rupee has become one of the worst-performing currencies in Asia, mainly due to the reversal of trades that involved using the Chinese yuan to fund long positions on the rupee. To mitigate the depreciation, the central bank has intervened in the spot, futures and non-deliverable forwards segments.
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On Tuesday, the Congress criticized the central government for domestic currency falling to a record low of 84.09 against the US dollar, and called it the government's "economic blunders" and "mismanagement."
Earlier this week, the rupee had dropped by 37 paise to hit an all-time low. This came after global markets witnessed a sell-off sentiment, driven by escalating geopolitical tensions in the Middle East and concerns about a US recession. However, the domestic currency recovered slightly on Tuesday morning, opening 25 paise higher at 83.84 against the dollar, signaling a rebound in the domestic market, despite pressure from aggressive dollar bids by foreign banks.
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The central bank probably sold around $1.5 billion in the non-deliverable forward market before the spot market opened, which helped keep the rupee from dropping below the psychological 84 mark, as per sources cited in the report.
A senior banker at a foreign bank mentioned that the RBI has instructed banks not to aggressively bid on USD/INR for speculative positions.
