Mumbai, November 10:
The Reserve Bank of India (RBI) stepped in on Friday to stabilize the rupee and bond markets, as global volatility intensified following the resolution of the US government shutdown. Traders reported RBI dollar sales through state-run banks to defend the rupee, which briefly touched a record low before recovering modestly.
According to market sources, the RBI also conducted open market operations (OMOs) to smoothen yield movements on maturing government bonds, ensuring sufficient liquidity amid heightened foreign outflows.
Rupee Under Pressure
The rupee had fallen to ₹85.50 per US dollar earlier in the session, tracking a stronger greenback and rising US Treasury yields. Analysts said the currency’s slide reflected both global risk aversion and persistent foreign institutional investor (FII) outflows from Indian equities.
“The RBI is clearly maintaining a line of defense to prevent a disorderly depreciation,” said Anindya Banerjee, FX strategist at Kotak Securities. “Intervention signals the central bank’s intent to anchor market confidence.”
Bond Market Support
Government bond yields, especially on the benchmark 10-year note, saw a brief spike before the RBI’s operations helped restore stability. The yield closed near 7.27%, supported by expectations that the central bank would continue its calibrated liquidity management through term repos and OMOs.
Economists said the RBI’s dual approach — defending the rupee and managing yields — underscores its commitment to financial stability amid a complex global backdrop.
Global Context
The market turbulence followed the US shutdown resolution, which initially boosted the dollar but raised concerns about longer-term US fiscal discipline. Meanwhile, oil prices and foreign exchange pressures across Asia added to the rupee’s headwinds.
What Lies Ahead
Traders expect near-term volatility to persist, but many believe the RBI has sufficient forex reserves of around $650 billion to counter speculative moves.
“Intervention levels suggest RBI is comfortable defending the rupee near 85.50, but sustained strength in the dollar could keep pressure intact,” said a senior dealer at a private bank.
