Traders said the Reserve Bank of India, through local banks located at India’s GIFT City International Financial Services Center, is selling dollars in the non-deliverable forward (NDF) market, as it seeks to support the depreciating rupee.
The rupee has repeatedly hit record lows in recent sessions as the prospect of more super-sized rate hikes from the US Federal Reserve putting pressure on emerging market currencies.
RBI’s intervention in the onshore NDF market was confirmed by treasury officials of two large private sector banks present at the International Financial Services Center (IFSC) at Gujarat International Finance Tec-City (GIFT City) in western India.
“RBI is also closely monitoring the position of banks in this market, and asking questions,” said one of the officials, adding that the central bank was looking at the gross and net position.
“RBI is interfering in NDF and SPOT as mediation between the two has mostly disappeared. Interference in one works in the other as well.”
In the offshore NDF market, USD/INR rates trade at a premium to onshore rates when there is major risk aversion globally and when the rupee is facing significant downside.
“The RBI has the ability to ensure that forward rates for the rupee are in alignment across markets,” said Vivek Kumar, economist at QuantEco Research.
“For RBI, the GIFT route is the easiest in terms of access to the NDF market.”
As per data available on the website of the Clearing Corporation of India, the inter-bank NDF volume from GIFT City IFSC stood at $2.3 billion on Thursday.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.
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