India’s central bank likely steps in as oil price surge hurts rupee, traders say

MUMBAI, March 2 (Reuters) – The Reserve Bank of India likely intervened in the foreign exchange market on Monday, five traders told Reuters, as the currency came under pressure due to a sharp rise in oil prices after conflict broke out in the Middle East over the weekend.

The traders said the central bank’s dollar sales through state-run banks were not aggressive, and were likely intended to limit volatility rather than hold the currency at a specific level.

The rupee was last at 91.3750 per dollar, down nearly 0.4%, after touching 91.4250 earlier in the day. Asian currencies were weaker across the board, while regional stocks also endured losses as risk appetite receded from global markets.

The central bank was present in the market but its activity was “very mild,” one of the traders said. Portfolio flows likely related to the rebalancing of a global equity index also influenced the rupee’s movement on the day, they added.

India’s benchmark equity indexes, the BSE Sensex and Nifty 50 were down more than 1% each, while the yield on the country’s 10-year benchmark bond rose more than 3 bps to 6.6955%.