INDIA: USD/INR Retreats From Record Highs Over Suspected RBI Intervention

Dollar demand by local importers, corporate outflows, equity-related outflows and oil buying by big companies all contributed to rupee weakness yesterday, resulting in USD/INR printing a fresh record high. However, suspected RBI intervention is likely accounting for the pullback lower today, with the pair 0.15% in the red at typing.

• According to a dealer at a state-owned bank who spoke to Business Standard, the RBI intervened by selling dollars toward the end of trade Thursday. “The RBI was not there initially, but they intervened at around 83.62,” the dealer told the newspaper. “For the next two to three weeks, the RBI will protect the 83.70 level,” he added.
• India’s economic activity continued to expand in June, evidenced by an expansion in its services and manufacturing PMIs, which may also be contributing to rupee strength at the margins. Market participants will look ahead to the minutes of the RBI’s latest meeting and foreign exchange reserve data due later today.