The rupee on Monday drifted down to near-80 levels against the dollar, hitting 79.9825 in intra-day trades as Brent prices rose to over $103/barrel. It ended at 79.9800 against the dollar, down 0.13 % over Friday’s close. So far in 2022, the rupee has depreciated around 7%, primarily because of the dollar index having strengthened to the levels of 108.
The Reserve Bank of India (RBI) is believed to have intervened in the currency markets on Monday, amid demand from importers for dollars. “There was a bit of a scramble for dollars by importers and the central bank did step in, though not significantly,” a dealer with a bank said.
RBI data showed the central bank had intervened more in the forwards and futures market in recent months rather than in the spot market. “Amusingly, the RBI actually net bought dollars in spot by $2 bn in May while the intervention through the derivatives route (forwards + futures + NDF) adds up to a whopping $19 bn,” Madhavi Arora, lead economist with Emkay, said.
Arora said the FX forwards data depicted a total drawdown of almost $14.4 bn from RBI’s FX forwards book in May, combined with another $1.5 bn in NDF. “The futures markets saw it buy and sell $2.08 bn and carrying forward another $1.2 bn short dollar position to next month, meaning $3.2 bn worth of sell side intervention,” she explained.
The currency markets are anxious about the widening trade deficit which came in at a record $26.2 billion for June, amid the relentless FPI outflows from the equity markets. Imports grew 57.55% to $66.31 billion while exports in June rose by 23.52% to $40.13 billion. FPIs have sold stocks worth nearly $30 billion so far this calendar year.
