The Reserve Bank of India is likely selling dollars once again via state-run banks to make sure the rupee does not slip to a record low, four traders told Reuters on Friday.
The rupee was at 83.24 to the U.S. dollar, barely changed from the previous session.
How sale of dollars by RBI helps in reducing fall of Rupee
For instance, the RBI offers to sell $100 million at the cost of Rs 80 per dollar. And then seeing the interest of the currency market, it announces that it will sell off $200 million more, hence, the buyers get an opportunity to buy more US dollars at a time when demand for it is very high.
However, by doing so, the rupee in the currency market gets reduced by Rs 8,000 million, so there is less rupee left in the market. And lower supply of the rupee causes the value of the rupee to rise or it gets costlier.