The currency found its footing this week after falling to an all-time low of 89.49 on November 21. While the central bank likely intervened on Monday to strengthen the currency, traders pointed to only intermittent signs of its presence in the market on Tuesday.
It “looks like they (RBI) are active but largely in the non-deliverable futures market,” said a senior trader at a state-run bank.
Lingering concerns over an uncertain situation in US-India trade talks have weighed on the rupee this year and traders believe recovery is unlikely unless there is a breakthrough in talks between New Delhi and Washington.
“We think current high US tariffs on Indian exports are likely to be reduced, which is likely to be positive for growth and equity markets, but we expect the RBI to replenish FX reserves on dips in USD/INR, limiting INR appreciation,” Goldman Sachs analysts said in a note. India’s foreign exchange reserves stood at $692.6 billion in the week ended November 14, 2014, according to central bank data. Meanwhile, the Reserve Bank of India’s net short position in currency forwards and futures stood at $59.4 billion at the end of September. Traders and analysts expect position sizes to have increased further in October, with data expected to be released on Friday.
Elsewhere, the dollar index was slightly lower at 100.1, while Asian currencies rose between 0.1% and 0.7% as investors debated the chances of a US interest rate cut next month.
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