BUZZ-COMMENT-INR a one-way bet no more as RBI comes down hard
Feb 12 (Reuters) - The Reserve Bank of India's aggressive intervention to shore up the Indian rupee this week has rattled complacent traders betting on a one-way decline in the currency.
The INR rallied to 86.50 on Tuesday, a 1.7% rise from Monday's all-time low of 88.00 on the Reuters dealing system. This was due to heavy and persistent U.S. dollar sales by the RBI estimated at $4 billion-$7 billion on Monday alone.
The RBI has often stated that it only intervenes to curb excessive volatility, but recent moves suggest it considers the whipsaw price action following its interest rate cut on Friday and the rapid 4% USD rise since early December as excessive.
The RBI may have also been looking to facilitate hedging strategies affected by the sudden surge in INR volatility.
Traders point to a distinct change in the RBI's normally passive approach of supporting the rupee, indicating it was intervening to drive the currency higher. A build-up of speculative short INR positions also compounded the dollar's fall.
The INR may remain under pressure due to U.S. President Donald Trump's tariff threats, dovish RBI expectations, a perception that the new governor will tolerate more FX flexibility and sizable outflows from Indian stocks and bonds. However, the RBI's action will ensure a healthier two-way market.
A daily USD/INR close below the 21-day moving average at 86.73 would open a test of 86.25, possibly 85.71-76. Resistance is at 87.30-40 and 88.00.
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