INDIA: RBI Purchase Dollars Near 83.75 as Rupee Slips to Fresh Lows

USD/INR ended the session flat, with Reuters citing sources in reporting that the RBI bought dollars at 83.75, albeit purchases were “not aggressive”. The pair has continuously posted fresh record highs over the past month, prompting intervention from policymakers in order to keep rupee volatility subdued. The impact of the intervention regime is clear to see. A close at current levels for the 1m implied USD/INR contract would be the lowest on record.

• The spike in oil prices this week on the back of rising geopolitical tensions in the Middle East has underpinned the rupee’s slide, while weakness in the Chinese yuan overnight may have contributed to poorer sentiment across Asia FX. Meanwhile, Reuters say local importer demand for dollars pressured the currency on an intraday basis.
• More broadly, foreign outflows from Indian equities may also be accounting for rupee weakness, with local equities seeing outflows of $342m yesterday, leading to a net outflow of $840m over the past five trading days.