India central bank takes steps to support rupee, opens dollar window for oil companies

MUMBAI: India’s central bank has announced more measures to support the rupee on Saturday after the currency fell to within striking distance of its record low.

The Reserve Bank of India will open a special window to meet the daily dollar requirements of three government oil-marketing companies to ease the pressure on the spot market

Under such an arrangement, used in times of strain on the currency, the RBI provides oil companies dollars directly from its foreign exchange reserves

Indian Oil, Hindustan Petroleum and Bharat Petroleum will be allowed to access to access dollars under the facility from Monday, the RBI said

Forex dealers will not permit users to rebook any foreign exchange derivatives, the bank said

Indian central bank likely intervenes to support rupee, traders say

The RBI slashed the limit for positions in exchange-traded currency derivatives involving the rupee to $5 million from $100 million

The central bank asked forex dealers to maintain a “foreign exchange risk reserve” for all derivative contracts involving the rupee equal to 20% of the notional amount of each transaction

The RBI has raised dollars and hiked its policy rate, but pressure on the currency has persisted. On Friday, the rupee closed at 96.73 per dollar, barely changed from its previous close, and near its all-time weakest level of 96.96, hit in May

The rupee rallied in the non-deliverable forward market on Saturday, with the one-month dollar/rupee contract falling about 40 paise in very thin trading, one trader said

India rupee posts weekly fall despite rate hike amid adverse flows, weak sentiment

Addressing oil companies’ dollar requirements removes one of the largest sources of demand from the FX market, which should help reduce volatility but it will show up in a depletion of reserves, said Dhiraj Nim, FX strategist at ANZ Bank in Mumbai