India possibly selling dollars to save rupee from record fall

The Indian central bank is possibly selling dollars via public sector banks, with the Indian rupee (INR) just shy of a record low, six traders told Reuters news agency.

The Indian rupee was at 83.2025 to the U.S. dollar, down from 83.09 at open and within a whisker of the lifetime low of 83.29.

“Hearing of public sector bank names on the offer (on USD/INR), which you would have to think is for the RBI (Reserve Bank of India),” a trader at a private sector bank said.

Two large public sector banks were major dollar sellers, according to traders.

The RBI has been on offer at “various price points” and not holding to any particular price right now, another trader said.

“Would not be a surprised if rupee saw a new low despite the RBI. The dollar selling is being absorbed without any difficulty,” he said.

The Reserve Bank of India has regularly intervened to make sure that the rupee does not fall below the 83.29 record low.

Surging oil prices and the rally on the dollar index suggest the rising risk of a significant decline in the local currency, analysts fear.

Brent crude has rallied 8.5% this month and surged nearly 26% in the current quarter on worries over supplies.

Higher oil prices could widen India’s oil trade deficit and impact the overall deficit. India’s trade deficit in August widened to a 10-month high at $24.2 billion.