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INR: Rupee Slips Again, Local Bonds Gain as RBI Announces Liquidity Support

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Citing traders, Reuters report that state-run banks were spotted offering dollars near 86.50 as the rupee declined on the back of dollar demand from importers and foreign banks. USD/INR is 0.2% higher during Thursday's session, while local bonds have gained after the central bank announced yesterday that it will be conducting daily repurchase operations in a bid to inject liquidity into the banking system.

  • According to DBS, the move from the RBI is intended to relieve tightness in banking system liquidity as persistent dollar sales to defend the rupee and seasonal drivers like tax outflows have added to recent stress. Meanwhile, former head of the RBI Duvvuri Subbarao said in an interview to Bloomberg that the central bank must avoid excessive intervention in the foreign exchange market and allow companies to adjust to volatility.
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Citing traders, Reuters report that state-run banks were spotted offering dollars near 86.50 as the rupee declined on the back of dollar demand from importers and foreign banks. USD/INR is 0.2% higher during Thursday's session, while local bonds have gained after the central bank announced yesterday that it will be conducting daily repurchase operations in a bid to inject liquidity into the banking system.

  • According to DBS, the move from the RBI is intended to relieve tightness in banking system liquidity as persistent dollar sales to defend the rupee and seasonal drivers like tax outflows have added to recent stress. Meanwhile, former head of the RBI Duvvuri Subbarao said in an interview to Bloomberg that the central bank must avoid excessive intervention in the foreign exchange market and allow companies to adjust to volatility.