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RBI’s Defense of Rupee Extends to Currency Futures Amidst Volatility Concerns

The Reserve Bank of India (RBI) appears to have extended its efforts to prevent the rupee from reaching record lows to currency futures, according to three bankers and two analysts. This move comes amidst concerns over heightened volatility in the currency market due to rising crude oil prices and U.S. yields.

Unusual Surge in Open Interest

An unusual surge in open interest has been observed in September USD/INR futures over the last three sessions on the National Stock Exchange, representing a significant portion of open interest in rupee futures. Experts suggest that this substantial increase in open interest is highly unusual and may indicate RBI’s intervention to curb volatility.

Possible RBI Selling

Futures traders have noticed occasional dips of 2 to 3 paisa in USD/INR currency futures, along with slight deviations from the spot over-the-counter (OTC) price. This, coupled with the surge in open interest, has led to speculation that the RBI may be actively selling in the currency futures market.

Speculation and Hedging

Part of the increased open interest can be attributed to speculators chasing the USD/INR higher and some hedging activities following the breach of the 83 mark. While these factors may contribute to the rise in open interest, the presence of the RBI in the currency futures market suggests efforts to stabilize the rupee amidst external pressures.

RBI’s Response

As of now, the RBI has not officially commented on its involvement in currency futures. However, this move underscores the central bank’s commitment to safeguarding the rupee’s stability in the face of external economic challenges and fluctuations.


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