“The RBI is determined to do whatever is necessary to ensure orderly movement in the foreign exchange market,” Malhotra said late Tuesday. The central bank’s recent steps should not be seen as capital control measures and those were aimed at ensuring that forex markets serve genuine hedging needs rather than speculative bets, the governor said.
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The rupee edged higher in the offshore market on Wednesday, with dollar-rupee non-deliverable forwards easing as much as 0.1% to 95.36. The currency outperformed Asian peers in the previous session, rising as much as 0.8% to 95.01 per dollar, following Monday’s 1% gain, as the RBI extended curbs on certain types of derivative transactions to further support the currency.
The extended curbs added to steps taken over the weekend, including a special window for oil firms to meet their dollar demand and broader restrictions on derivatives markets as the rupee slipped toward record lows. RBI has also been aggressively intervening in the currency market to defend the local unit, as per Bloomberg.
“Over the past few months, we have observed a very high proportion of trades being canceled and rebooked on the same day,” he said. The RBI even observed cases where about one-third of trades were closed or canceled on the day they were entered into, Malhotra added.
Earlier this month, the central bank’s Monetary Policy Committee (MPC) also increased its benchmark repurchase rate by 25 basis points to contain accelerating inflation and support a weakening rupee amid a foreign fund selloff.
(With inputs from agencies)
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