Rupee Stabilizes Above Record Low, Likely Supported by RBI Intervention

Rupee Stabilizes Above Record Low, Likely Supported by RBI Intervention

The Indian rupee held steady above its all-time low on Thursday, bolstered by what traders suspect to be intervention by the Reserve Bank of India (RBI). As of 10:20 a.m. IST, the rupee was trading at 83.9725 against the US dollar, virtually unchanged from its previous close of 83.9775. The currency had reached a record low of 83.9850 last week.

The stability of the rupee comes amid general weakness in Asian currencies, influenced by recent US economic data. Although US consumer prices saw a slight increase in August, underlying inflation remains persistent, dampening expectations of a substantial 50 basis point rate cut by the Federal Reserve in its upcoming meeting.

Traders have noted that state-run banks' dollar sales, likely conducted on behalf of the RBI, played a role in supporting the rupee. "The rupee continues to stabilize within a defined range due to the RBI's active management," said Amit Pabari, Managing Director at FX advisory firm CR Forex.

The RBI has consistently intervened over the past month to keep the rupee above the significant psychological level of 84. While there is a small chance that the rupee could dip below this level in the coming days, a severe depreciation is considered unlikely given the central bank's ongoing control over the currency.

Additionally, dollar-rupee forward premiums have eased, with the 1-year implied yield dropping 2 basis points to 2.23%, retreating from a 16-month high reached earlier.

Looking ahead, market participants will be watching closely for US jobless claims and wholesale inflation data later today to assess potential Federal Reserve rate cuts throughout 2024.