Undated editorial illustration of Indian rupee cash notes and stock market indicator board.
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The Reserve Bank of India has asked some large banks not to increase existing positions against the central bank rupee Four bankers told Reuters it was an effort to shore up a currency that has fallen to record lows for three consecutive days.
Officials at the Reserve Bank of India’s Financial Markets Regulation and Operations Department called major banks on Tuesday, when the yuan was at risk of breaching 84 against the dollar in the spot market. The bankers declined to be named because they were not authorized to speak to them.
The Reserve Bank of India did not immediately respond to an email seeking comment. Reuters was unable to confirm the full list of banks called by the RBI.
Indian rupee becomes Worst performer Last month, Asian currencies came under pressure from the unwinding of trades using the yuan to fund long bets.
To slow the depreciation, the Reserve Bank of India intervention Covers spot, futures and non-deliverable forward contracts.
On Tuesday, Reserve Bank of India officials asked us to “treat the existing position size as a risk limit,” a senior financial official at a major foreign bank said.
He said this meant the RBI did not want them to increase their existing rupee trading positions.
The Reserve Bank of India often uses this informal approach to urge banks to deal with excessive volatility. Lenders usually comply.
The rupee fell to a record low of 83.96 against the US dollar on Tuesday and could have depreciated even more without direction and direct intervention from the Reserve Bank of India.
A foreign exchange trader at a bank said the central bank may sell about $1.5 billion in the non-deliverable forward market before the spot market opens. This intervention prevented the rupee from falling below the psychological level of 84.
Another senior banker at a foreign bank said the Reserve Bank of India has asked banks “not to aggressively bid for (USD/INR) speculative positions.”
Bankers said the central bank did not ask them to reduce existing positions or issue specific instructions on non-deliverable forward market positions.
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