RBI intervenes through PSUs heavily in currency market

The Reserve Bank of India RBI sold dollars through public sector banks PSBs heavily in the currency market, which helped the Indian currency cut back losses it incurred in early trade.

The central bank intervened during the early trading hours when the opened was weaker, at 75.72 per dollar, compared to the previous closing of 75.29. The Indian currency closed at 75.34 a dollar, down 0.06 per cent from its previous close. Sentiments in the equity market bounced back after a weak opening, which helped the domestic unit. On behalf of the spot and forward market, select PSBs sold dollars aggressively. There was intervention at 75.60 -- 65 levels. This helped cut the losses, said Amit Pabari, managing director of CR Forex.

The weakened 0.95 per cent against the dollar in February. During this period, the Indian currency, one of the worst performing Asian currencies in 2022, lost 1.33 per cent.

The central bank's intervention was to make sure it does not depreciate too much against the Chinese currency, dealers said. PSUs were seen on the offer to smoothen the volatility in USDINR. Abhishek Goenka, founder and chief executive of India Forex Advisor, said that CNH INR at 12 seems to be the line in the sand.

Inflation is also a concern for the central bank with the headline CPI inflation crossing above its upper tolerance band of 6 per cent in January. Higher crude prices and a stronger Yuan can be extremely inflationary at the same time. The pound continued to strengthen throughout the session as domestic equities recovered, initial long Dollar positions stopped and general month end exporter selling, Goenka said.