RBI Intervenes As Maturing Forward Flows Keep Rupee Near Record Low

The Reserve Bank of India (RBI) intervened in the foreign exchange market to support the rupee as dollar demand linked to maturing forward contracts kept the currency near its record low, according to market participants and Reuters.

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The rupee was quoted at ₹93.96 per U.S. dollar on March 25, down 0.1% on the day and close to its all-time low of ₹93.98. Traders indicated that the central bank likely intervened through state-run banks to prevent a sharper depreciation.

Dollar Demand From Forward Maturities

This pressure on the rupee resulted from the maturity of the non-deliverable forward (NDF) contracts, which the RBI had previously entered to control currency volatility. This resulted in a rise in the demand for the U.S. dollars.

According to analysts at Barclays, the RBI has been intervening in both the spot and forward markets to manage currency movements. The firm noted that maturing forward positions have continued to generate dollar demand, weighing on the rupee.

The RBI did not respond to queries from Reuters regarding its intervention or the impact of earlier forward positions.

Reference Rate Signals Strong Buying

Market participants also pointed to elevated demand for dollars around the daily reference rate, which is used to settle foreign exchange contracts. The reference rate was quoted at a premium of about 0.75 to 0.90 paise, indicating strong buying interest for the U.S. currency.

Similar pressure had been observed in late February when earlier intervention-linked forward contracts matured, leading to increased demand for dollars.

Divergence From Other Markets

The rupee remained under pressure even as other domestic markets showed strength. Equity benchmarks rose during the session, while the yield on the 10-year government bond eased to 6.852%.

Global cues were supportive, with oil prices falling below $100 per barrel amid reports of possible easing in geopolitical tensions in West Asia. Asian equity markets also rose on the prospects of a possible ceasefire between the U.S. and Iran.

In spite of this, currency markets continued to show the impact of the previous RBI interventions and the continued demand for the dollar, keeping the rupee at its weakest point.