MUMBAI (Reuters/Web Desk) – The Reserve Bank of India (RBI) is likely selling dollars via state-run banks to ensure that the rupee does not fall to a record low, four traders told Reuters on Monday.
The rupee was at 83.2475 against the US dollar, barely changed from its close at 83.2625 in the previous session, despite the weakness its Asian peers and the jump in oil prices.
Brent crude oil futures climbed nearly 6 per cent on Friday and were last at $91 per barrel on concerns surrounding the military conflict in the Middle East.
The RBI is intervening at 83.25 and has been intervening routinely to stem further decline in the rupee, traders said.
"Central banks in emerging markets are required to intervene in the currency market from time to time to prevent excessive volatility," RBI Governor Shaktikanta Das said last week on the sidelines of the IMF and World Bank annual meeting in Marrakech.
Read more: India central bank chief says currency markets interventions not always 'black and white'
Referring the US Treasury Department's regular foreign exchange report and similar research by the International Monetary Fund (IMF), he also said that currency market interventions by emerging market economies should not be viewed "as a black and white story"
Das called on the United States and other countries and organizations to review their use of "labelling like watch lists," underscoring that these comments were not directed solely at the Treasury.
"Emerging market economies will have to build reserves and central banks in emerging markets are required to intervene in the currency market from time to time to prevent excessive volatility," Das said on the sidelines of the IMF and World Bank annual meeting in Marrakech.
"So therefore any labelling, any kind of labelling of currency interventions should not be a black and white story and you need to look at the nuances of it."
Similarly, Japanese Finance Minister Shunichi Suzuki had said he told his G20 counterparts that Tokyo may need to take "appropriate action" in the exchange-rate market as global monetary tightening could heighten volatility in currency moves.
Read more: Japan tells G20 it may need to act in currency market
"I told the G20 meeting we need to be mindful of the risk that market volatility could heighten, including in the currency market, as monetary tightening continues globally," Suzuki told a news conference after attending a meeting of Group of 20 (G20) finance ministers and central bank governors.
"I also said excess volatility in the currency market was undesirable, and that we may need to take appropriate action depending on developments," Suzuki said.