A trader at a second private sector bank said one of the largest public sector banks has been "on both sides" in the onshore market, making the rupee "fairly unresponsive". (Reporting by Nimesh Vora; Editing by Janane Venkatraman)
By Nimesh Vora
MUMBAI, Feb 22 (Reuters) - The Reserve Bank of India
(RBI) is likely intervening in both the offshore and onshore
markets to shield the rupee from the fallout of investors
lifting their expectations on the U.S. Federal Reserve's
terminal rate, traders said on Wednesday.
The rupee has fared much better against the dollar than
other emerging market currencies since the blowout U.S. jobs
report on Feb. 3 raised bets of a higher-for-longer rate regime.
Since then, the rupee has fallen 1.2%.
However, the Korean won has plunged by 6% in that
period, the Thai baht by 5.2%, the offshore Chinese yuan by 2.3% and the South African rand by 7%.
After that, however, it has barely budged despite U.S. data
over the period further strengthening the case for hawkish
monetary policy. That, traders reckon, is mainly due to the
RBI's intervention.
"Without the RBI, there is little doubt that the rupee would
be significantly lower," a currency and rates trader at a
Singapore-based hedge fund said.
This trader and two others that Reuters spoke to did not
want to be identified on account of their internal policies.
The RBI has been consistently offering dollars, mostly via
the Bank for International Settlements, to keep the USD/INR
1-month non-deliverable forward (NDF) below the 83-level before
onshore markets open, the hedge fund trader said.
On the order system he uses, the bid-offer on the 1-month
NDF is narrower than usual, he pointed out. At times, it is less
than one paisa for large quantities, he said, suggesting the RBI
has been fairly active, including on Wednesday.
The rupee was little changed at 82.80 on the day despite an
overnight jump in U.S. Treasury yields, after an unexpected
rebound in U.S. business activity.
"The RBI's offshore presence, alongside what it is doing
onshore, is making speculators stay away from the rupee," a
trader at a Mumbai-based private sector bank said.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.