Rupee recovers from day's low after RBI intervention

The Indian rupee bounced from its intraday low on Tuesday after the Reserve Bank of India intervened in the spot market, traders said. The central bank sold dollars to support the currency, which had come under pressure from month-end dollar demand and maturing non-deliverable forward contracts. The exact size of the intervention was not immediately clear. The RBI does not comment on its market operations.

The rupee had opened weaker and touched a fresh low before recovering. The intervention helped narrow losses. The currency ended the session off its lows, though still weaker on the day.

The rupee has been under pressure in recent weeks. The dollar strengthened on expectations that the Federal Reserve will keep rates higher for longer. Foreign portfolio outflows from Indian equities have added to the selling. The RBI has been intervening regularly to prevent excessive volatility, traders said.

The central bank typically uses sell-buy swaps in addition to spot dollar sales. Such operations absorb rupee liquidity while defending the currency level. The swaps allow the RBI to manage the pace of depreciation rather than defend a specific line, traders said.

The next catalyst for the rupee is the US inflation data due later this week. Indian inflation data is also due. A hotter US print would likely push the dollar higher and renew pressure on the rupee. A softer print could ease some of the selling.