The rupee weakened Thursday as the Reserve Bank of India intervened to limit further losses in the domestic currency against a strong dollar due to risk aversion, driven by fears geopolitical tensions and aggressive rate hikes would push the global economy into recession.
Financial markets have tumbled as traders await the direction of US inflation data to be released later on Thursday.
The rupee last changed hands at 82.3925 per dollar, after opening at 82.2800, compared to its previous closing rate of 82.3112, according to Bloomberg.
PTI reported that the rupee fell 6 paise to provisionally close at 82.39 against the US dollar.
The domestic currency’s trading range of 82.2563 to 82,4175 suggests it has held out against a strong dollar, extending a stable pattern seen this week with the RBI’s intervention.
“The rupee has remained relatively stable through the day as RBI also continued to sell $82.40 today as the market waited for US CPI data,” said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
“RBI’s announcement to banks for not taking any positions did not seem to have the desired effect as importers’ buying and hedging continued with unabated demand for dollar,” he added.
A Reuters report citing bankers and traders shows that the RBI has asked local banks to refrain from taking further rupee positions in the offshore market in its battle to contain the dramatic decline in the rupee this year.
That is the latest move by the Bank of India, aside from selling dollars through state-owned banks in the spot and futures markets by burning about $100 billion of its foreign exchange reserves since Russia invaded Ukraine in late February.
Rising food and fuel costs pushed Indian retail inflation to 7.41 percent last month, its highest level since April, adding further pressure to already tight household budgets.