Intermittent dollar-buying intervention by the Reserve Bank of India (RBI) held the Indian Rupee in a tight range on Monday.
The rupee closed at $81.7950 compared to 81.80 in the previous session.
“RBI is still in the market…otherwise there will be no (dollar) bidders in the market,” said a trader at the state bank, adding that exporters were also hedging dollar bonds at this level. .
The central bank has absorbed most of the dollar inflows seen in markets over the past week, traders and analysts said.
“The RBI continues to buy, protecting the dollar and exporters from depreciation,” said Anil Kumar Bhansari, head of finance at Finrex Treasury Advisors LLP.
The RBI’s foreign exchange reserves surged to a 10-month high of $588.8 billion in the week ending April 28, according to the latest data. The data also explain changes in valuations, but analysts said much of that could also be due to dollar-buying interventions.
Foreign institutional investors bought a net worth of Rs 116.31 billion ($1.42 billion) worth of shares in April. In the last six sessions alone, he made $1.7 billion.
The dollar started the week under pressure on Monday, with traders betting the dollar may have peaked along with U.S. interest rates as they keep an eye on looming inflation and loan data.
Economists expect core inflation to rise by 0.4% month-on-month, turning the focus to Wednesday’s release of US inflation data.
The data will come under scrutiny as the US Federal Reserve (Fed) is increasingly likely to opt for a moratorium on interest rates.
Traders will also keep an eye on Indian inflation data due later in the week. This could be a clue for the RBI’s next rate hike move. (Reporting by Nallur Sethuraman of his in Mumbai; Editing by Janane Venkatraman)