InvestorQ : How much of RBI intervention was there in the week to defend the rupee at around 80/$?
rhea Babu made post

How much of RBI intervention was there in the week to defend the rupee at around 80/$?

Riya Dwivedi answered.
4 weeks ago

It is very likely that the aggressive intervention by the RBI that may have helped the rupee hold on to the Rs80/$ in the previous week. Rs80/$ is a psychologically critical mark for the dollar in the spot market. However, in the offshore markets, the rupee has already fallen beyond 80/$. On Friday itself, the RBI had sold dollars to the tune of more than $1 billion in the spot market to support the rupee. On Friday, rupee opened at 79.93 and got close to 80/$ but later closed fairly strong at Rs79.72 for the day on RBI intervention.

It is not just the RBI intervention but even the commentary from the Fed members has been sobering of late. For example, recent Fed statements were that they preferred a 75 basis points rate hike during the July FOMC meeting. However, if you go by the CME Fedwatch, it still assigns probability of 45% to a 100 bps rate hike in July and that is not great news. The focus also shifts to the proposed visit of US President Joe Biden visit to Saudi Arabia. The US wants OPEC to pump more oil to bring oil prices under control.

The hassle for the rupee has been the consistent selling by the foreign portfolio investors (FPIs) who have sold Rs2.25 trillion in this year is putting pressure on the rupee. They sold Rs2.25 trillion worth of equities in calendar year 2022. That has also been largely responsible for the sharp fall in the rupee. Meanwhile, the RBI is also trying to diversify sources of forex funding to reduce the volatility and prevent the devaluation of the rupee beyond a point.