Reserve Bank of India Intervenes in Currency Market to Prevent Rupee Appreciation

The Reserve Bank of India (RBI) is reportedly buying dollars through state-owned banks to prevent the rupee from appreciating above the psychological level of 81 rupees per dollar, according to traders cited by Reuters. The rupee last traded at 81.125 rupees against the US dollar, after climbing to 80.89 rupees per dollar in morning trade. This marks the first time the rupee has risen above 81 since December 1.

A trader from a private sector bank said that importers are also buying dollars, adding that “Given what has happened, it is not surprising that the Reserve Bank of India plays a role here.” Another trader revealed that the large purchases by state-owned banks after the market opened were likely attributed to the Reserve Bank of India, while importers also flocked to buy dollars.

The RBI’s intervention in the currency market aims to prevent the rupee from becoming too strong, as a stronger currency can hurt the country’s export-dependent economy. The central bank has not officially commented on the reported dollar purchases.

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