On Thursday, the Indian rupee initially weakened to a 10-month low against the US dollar due to factors like the increase in US Treasury yields, global risk aversion, and geopolitical uncertainties, according to market analysts.
However, by 11 am, the rupee had recovered some ground. It was trading at 83.09 against the US dollar. In markets, the rupee briefly fell to 83.45 against the dollar as investors sought stability in the greenback amid rising US 10-year treasury yields. The Reserve Bank of India (RBI) swiftly took action to stabilize the situation by selling dollars in an effort to prevent a decline in the value of the rupee.
In instances of devaluation, such as during last years Russia Ukraine conflict RBI has implemented strong measures like strategic sell-buy FX swaps known as ‘Brahmastra’. This involves selling US dollars and repurchasing them at a maturity date with an aim to protect the rupee from drastic devaluation. It is worth noting that during that period, the rupee had dipped to levels around Rs 83.75 83.76 per US dollar. To counter this decline, RBI responded with a substantial sell-buy swap amounting to $10 billion between March and April 2022. This intervention played a role in appreciating the value of the rupee.
Some experts suggest that the RBI could potentially adopt an approach in this situation. Additionally, considering that Foreign Institutional Investor (FII) inflows have remained positive in August, there is optimism that the rupee may stabilize. Although India’s domestic economic fundamentals are strong, the rupee is still susceptible to pressures.