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INR: INR Set for Worst Session in Over 2-Years, RBI Intervention Appears Limited

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The rupee is set for its worst day in over 2 years, falling over 0.6% against the greenback during Monday’s session as rising oil prices weigh on the currency. USD/INR has spiked with the pair rising through 86.00 to around 86.50, fresh record highs, further evidence of greater FX volatility under the new central bank leadership.

  • According to Reuters, a surge in the US dollar, likely outflows from local equities and limited intervention from the central bank have all contributed to the rupee’s slump. Regarding the latter, they write that while the RBI sold dollars on Monday, they did so less aggressively than in previous episodes of sharp rupee weakness.
  • According to comments from analysts at Danske Bank cited by Bloomberg, the RBI has possibly decided to let the rupee weaken more as headwinds increase, but will aim to reign the rupee in and slow the pace of depreciation. Meanwhile, Goldman Sachs say the RBI will have to be a net buyer of government bonds in the next financial year to inject liquidity in the banking system and partly offset FX sales-related rupee-cash drain.
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The rupee is set for its worst day in over 2 years, falling over 0.6% against the greenback during Monday’s session as rising oil prices weigh on the currency. USD/INR has spiked with the pair rising through 86.00 to around 86.50, fresh record highs, further evidence of greater FX volatility under the new central bank leadership.

  • According to Reuters, a surge in the US dollar, likely outflows from local equities and limited intervention from the central bank have all contributed to the rupee’s slump. Regarding the latter, they write that while the RBI sold dollars on Monday, they did so less aggressively than in previous episodes of sharp rupee weakness.
  • According to comments from analysts at Danske Bank cited by Bloomberg, the RBI has possibly decided to let the rupee weaken more as headwinds increase, but will aim to reign the rupee in and slow the pace of depreciation. Meanwhile, Goldman Sachs say the RBI will have to be a net buyer of government bonds in the next financial year to inject liquidity in the banking system and partly offset FX sales-related rupee-cash drain.