Due to the ongoing war in the Middle East, the pressure on the Indian rupee has increased amid intense turmoil in the global markets. To reduce this pressure, the Reserve Bank of India (RBI) has supported the rupee by injecting about 12 billion dollars into the market this week. Seven bankers have given this information. According to bankers, this interference done by selling dollars could range from $9 billion to more than $15 billion, while the average estimate is around $12 billion.
impact of middle east war
Tension has increased in the Gulf region as the Iran-related conflict entered its seventh day. This has also affected the global markets. Due to this, Asian currencies came under pressure and the rupee also reached a record low. Crude oil prices have increased by about 16% this week. Besides, foreign investors have also withdrawn about $2 billion from the Indian stock market. Amidst the increasing uncertainty, importers have also started hedging more to secure their payments.
RBI’s aggressive intervention
Bankers say that RBI intervened in many markets like spot, forward, futures and non-deliverable forward (NDF) this week. However, maximum activity was seen in the NDF market. On Thursday, RBI intervened by selling dollars even before the market opened. The central bank has been taking such steps earlier also when the pressure on the rupee increases.
Sharp recovery in rupee
After this step of RBI, the rupee strengthened by about one rupee in the interbank market on Thursday within a few minutes. Against the dollar it increased from around 92.10 to 91.10. However, later some part of this increase reduced. At around 2 pm on Friday afternoon, the rupee was seen trading at the level of 91.68 against the dollar. Talking about India’s foreign exchange reserves, it is more than 723 billion dollars, which is considered to be one of the largest reserves in the world. This is the reason why RBI tries to manage the highly volatile situation of rupee by intervening in the market when necessary.