Global volatility prompts India cenbank to support rupee across markets
By Jaspreet Kalra
MUMBAI, Aug 6 (Reuters) -The Indian central bank intervened in the non-deliverable forward, local spot and currency futures markets to support the rupee this week as global equities tanked on concerns of a U.S. recession and the unwinding of a popular carry trade, four traders told Reuters.
The rupee declined to a record low of 83.8825 to the dollar on Tuesday, weakening past its previous all-time low of 83.8450 hit in the previous session.
While non-deliverbale forwards (NDF) had signalled the currency might slip below 84 at the open of the local spot market, likely intervention from the Reserve Bank of India in the NDF market ensured a nearly flat opening, traders said.
The rupee INR=IN was at 83.88 at 11:00 a.m. IST after settling at 83.8450 in the previous session.
The central bank's interventions across markets segments have ensured that dollar-rupee volatility doesn't pick up sharply, a trader at a private bank said.
The rupee's 1-month realised volatility INR1MVCC=R is at 1.1%, the lowest among major Asian peers.
The Indian currency should continue to weaken steadily in the near-term but the central bank is unlikely to allow sharp moves, a senior trader at a foreign bank said.
The RBI did not immediately respond to an email seeking comment. The traders did not want to be identified as they are not allowed to speak to the media.
Overseas investors pulled out more than $1 billion from Indian shares on Monday, which hurt the rupee alongside an unwinding of carry trades that used the Chinese yuan to fund long bets on the rupee.
"Popular carry trades including... short CNH/INR have likely been closed," Michael Wan, senior currency analyst at MUFG Bank said in a note.
The open interest on NSE dollar/rupee currency futures expiring on Aug. 28 rose by $1.4 billion on Monday.
The rise was largely on account of RBI's intervention, a senior trader at a state-run bank said.
Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala
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