MUMBAI (Reuters) – The Reserve Bank of India has been frequently intervening in the non-deliverable forward (NDF) market to make sure that the rupee does not drop to a record low, four bankers told Reuters on Thursday.<\/p>\n\n\n\n
The rupee was at 83.1525 to the U.S. dollar as of 11:16 a.m. IST, not too far from its record low of 83.29 hit in October 2022. The currency has largely avoided the decline in its Asian peers.<\/p>\n\n\n\n
“The RBI intervened on NDF in the morning (before local over-the-counter, OTC, markets opened) and it did the same yesterday,” the head of treasury at a private sector bank said.<\/p>\n\n\n\n
“The idea here, it seems, is to set the tone for the day and to let speculators know that they are there and are watching.”<\/p>\n\n\n\n
The banker said the RBI has been intervening in the NDF market via the BIS (Bank of International Settlements) and a large U.S.-based bank.<\/p>\n\n\n\n
NDFs are offshore dollar-settled currency derivatives used by investors with limited access to onshore markets to hedge their exposure or speculate.<\/p>\n\n\n\n
The sources requested to not be named as they are not authorized to speak to the media. The RBI and BIS did not immediately reply to a Reuters email seeking comment.<\/p>\n\n\n\n
“Several times we have been hit by the BIS (on the trading system). At times, we see (Indian) public sector bank names,” the head of proprietary trading at a foreign bank said.<\/p>\n\n\n\n
The RBI’s intervention, he further noted, was not limited to the Asia session.<\/p>\n\n\n\n
“During the New York session, if there is a sense of the\u00a0USD\/INR\u00a0pushing higher, the RBI steps in.”<\/p>\n\n\n\n
During the U.S. trading hours on Wednesday, the 1-month USD\/INR NDF rose to 83.44 — following the robust U.S. services data — which implies a spot rate of around 83.35.<\/p>\n\n\n\n
By the time local OTC markets opened on Thursday, the contract had retreated to 83.20 and the spot opened at 83.12.<\/p>\n\n\n\n
Apart from NDF, the central bank has been likely supplying dollars via public sector banks in the local OTC market, traders said.<\/p>\n