INR has become the best performing currency today due to RBI’s massive intervention

The Indian rupee gained 28 paise against the US dollar on Wednesday despite foreign investors selling into local equities as the Reserve Bank of India (RBI) intervened heavily in the currency market to curb speculative positions against the currency.

The rupee closed at 89.88 to the $1, against its previous close of 90.16 to the $1, its highest closing level since December 19.

The currency opened at 90.17 to the $1 and rose to 89.86 per $1, with the central bank intervening at several levels throughout the day, traders said. The intervention made the currency the most profitable in Asia.

“We have seen that the RBI is not comfortable with extended unilateral movements in the currency. Today’s intervention removed speculative bets on the rupee and this decline in levels was bought by importers,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

The rupee gained 0.3% and was the best-performing currency in Asia, followed by the Japanese yen.

The intervention of around $2-3 billion has prompted traders to be cautious about when this RBI position matures, said a trader with a public sector bank.

There could be a milder appreciation towards 89.50 per $1 this month, traders said.

“I expect some appreciation after the USDINR swap next week, as the central bank will get dollars to stem short-term volatility following foreign fund inflows. The currency rallied last month after the swap and I expect the same this time,” said Dilip Parmar, currency research analyst at HDFC Securities.

RBI will conduct a USDINR buy/sell swap at $10 billion on January 13

“It is difficult to judge the rupee’s direction at the moment, but 89.50 to 90.50 can be broadly considered as the January range,” Bhansali said.