On Tuesday, the rupee fell to a new all-time low of 77.56 against the dollar, with the Reserve Bank of India intervening to prevent additional losses.
The rupee reversed from historic intra-day lows as the RBI intervened in both spot and futures markets.
At the interbank foreign exchange, the rupee opened weak against the dollar at 77.67, before falling further to a record intra-day low of 77.7975.
From Friday’s finish of 77.31, the currency closed temporarily at a fresh record low of 77.56.
The rupee recovered to end the day at 77.31 on Friday, after hitting an intra-day record low of 77.63 against the US dollar on Thursday. The RBI intervened in the open market to calm the market.
According to Reuters, the central bank began selling dollars through state-run banks at approximately 77.75 rupee levels on Tuesday, helping the currency regain some territory.
“Given the RBI’s substantial FX reserves, we expect the rupee to stay more stable and depreciate less against the greenback over the next couple of years,” Capital Economics’ Adam Hoyes wrote in a note.
In recent weeks, the Reserve Bank of India has been active in both spot and futures markets to assist reduce the rupee’s extreme volatility. The central bank was intervening in FX markets to support the rupee and prevent “jerky” currency fluctuations.
As per insiders, the RBI intervened in the market “to lessen the impact” of currency depreciation in India and “curtail abrupt movements in the rupee.”
However, they also stated that the intervention will be used to keep the currency in a narrow range, and that the recent exchange rate fluctuation was part of a larger global trend.