RBI sells dollars in NDF markets, keeps pair inside narrow range
The Reserve Bank intervened in offshore non-deliverable forward (NDF) markets to open the US dollar lower against the Indian rupee, taking the dollar down to 89.15. Throughout the day the USD/INR traded in a tight band between 89.00 and 89.30, reflecting controlled volatility after the central bank’s action.
Why the RBI used NDF intervention
Selling dollars in NDF markets is a tool the central bank can use to influence offshore sentiment and help stabilise the onshore rupee when direct intervention is less desirable or market conditions are fragile. By supplying dollars offshore, the RBI aimed to ease upward pressure on the USD/INR rate and prevent disorderly moves.
What this means for the rupee and markets
- Short-term relief: The intervention helped keep the rupee steady within the 89–89.30 range, reducing sudden swings that can hurt trade and investment flows.
- Importers and corporates: A firmer or stable rupee eases dollar funding needs for companies importing goods or servicing overseas debt.
- Exporters: Exporters may see a slight impact on competitiveness if the rupee remains stronger, though the narrow range limits major effects.
- Inflation and policy: A stable currency can help keep imported inflation in check, which is a positive for overall price stability and monetary policy considerations.
Market reaction and liquidity
Traders responded to the RBI’s selling by trimming long-dollar positions and re-pricing short-term risk. The narrow trading band suggests liquidity held up well, with market participants viewing the move as targeted rather than a sustained change in exchange rate policy.
What to watch next
- Global dollar strength and US interest rate cues — these remain key drivers for USD/INR.
- Domestic data on inflation, growth, and capital flows — any surprises could widen the trading range.
- Further offshore interventions — repeated use of NDF sales may signal a defensive stance to maintain currency stability.
Overall, the RBI’s intervention in NDF markets provided a short-term stabilising influence on the rupee, keeping USD/INR calm in a narrow band while markets await fresh macro cues.