A likely central bank intervention at the end of Friday’s trading helped the currency rise sharply, people following the market said. Previously, the rupee was trading between 89.95 and 90.30. The price opened at 90.13, compared to Thursday’s closing price of 90.24 per dollar.”A possible intervention by the RBI just five minutes before market close saw the rupee close strongly at 89.27. Being a very thin market before the end of the year, any small volume creates volatility in the foreign exchange market, which exactly happened today from 3:25 PM to 3:30 PM,” said KN Dey, a senior forex market consultant.
It is a good time for importers to cover their payments, he added.
Meanwhile, the one-year term premium rose to 2.84%, the highest level since October 2022, due to strong demand for hedging.
“The sharp appreciation (in the spot market) pushed the rupee to the top of the Asian currency rankings, fueled by robust corporate dollar inflows and a clear return to risk-on sentiment,” HDFC Securities vice-president Nandish Shah said. There was a net inflow of $194 million on Friday, according to NSDL data. In total, foreign portfolio investors sold a net $10.145 billion in Indian markets so far in December.
The central bank has intervened decisively in the market over the past three days, allowing the troubled currency to recover.
“With the RBI likely to intervene proactively, the short-term outlook for USDINR has turned bearish,” he said.
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