RBI sharpens rupee strategy as Commerzbank flags recalibration

The Reserve Bank of India has adjusted its approach to managing foreign currency inflows, according to a research note from Commerzbank, and separately was observed intervening in the forex market on Monday, traders told Reuters. Commerzbank's analysis, reported by bitcoinworld.co.in, says the RBI is now more flexible in its intervention strategy, aiming to smooth volatility rather than defend a specific exchange rate level. The Hindu Business Line reports that state-run banks were spotted offering dollars, most likely on behalf of the RBI, to protect the rupee from pressure linked to uncertainty over the US-Iran war and corporate hedging flows.

The rupee was little changed on Monday at 95.6425 per dollar, holding to a narrow range in early trading. Traders gauge that robust inflows under policy measures to strengthen India's balance of payments have bolstered the RBI's ability to support the rupee through interventions. Commerzbank attributes the recalibration to changing global financial conditions including US interest rate expectations, and views the shift as a positive signal that the RBI aims to maintain orderly market conditions while supporting growth. The recalibration could affect the rupee's trajectory, trade balances and inflation.