India's Rupee Surges on Central Bank Intervention
India's rupee experienced a sharp rally of nearly 1% against the dollar on Tuesday, the most significant gain in over two years. This unexpected surge came amid speculation of aggressive intervention by the central bank, Reserve Bank of India (RBI).
The rupee's rally caught traders off guard, as the currency had recently hit a series of record lows. The surprising move is expected to discourage speculative positioning and support market stability.
Ashhish Vaidya, head of treasury at DBS Bank Ltd., described the RBI's actions as "a very smart move." The central bank's intervention follows concerns that RBI Governor Sanjay Malhotra, appointed in December, might allow the rupee to fluctuate more freely.
Vaidya noted that the rally "smoothens things out a little bit" after the rupee's steady depreciation in recent weeks. The RBI did not immediately respond to requests for comment.
The rupee's earlier decline was influenced by the rate cut last week by the central bank and a stronger dollar driven by US tariffs. However, analysts speculate that the RBI sold billions of dollars in the foreign exchange market to support the rupee.
The intervention aims to maintain currency stability while preserving market efficiency, in line with the RBI's previous statements on foreign exchange strategy.