India is accused of currency intervention by selling the US dollar in the forex markets to safeguard the falling rupee. The Reserve Bank of India (RBI) directed State-run banks to offload USD holdings to cap the rupee’s losses. The sell-offs took currency traders aback as the INR tried to climb unnaturally in the indices on Wednesday and failed.

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The US dollar saw a massive spike, reaching a high of 87.45 against the Indian rupee on Wednesday. That’s a steep fall as the INR was at the 85 level against the greenback at the beginning of the month. The local currency displayed resilience against the Benjamin last quarter, but is eventually cracking. The greenback surged ahead by 2.5 points in less than 30 days as the DXY index briefly rose in value.

India Accused of Selling the US Dollar to Safeguard the Rupee

Five currency traders spoke to Reuters on the condition of anonymity that the RBI might have directed the banks to dump US dollars. This helped the rupee limit its losses against the US dollar and maintain a balance and not crash imminently. However, they pointed out that the sell-offs were “not unusually large and intermittent,” said a trader at a private sector lender.

India has been accused of currency market intervention multiple times to protect the rupee by offloading the US dollar. Not just India, countries such as Japan and China are also accused of doing the same when their currencies dip. This buys them time to think of a strategy before the USD goes on a rampage in the markets.

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After a month, the DXY index is heading towards the 99 mark after surging by 0.06% in the day’s trade. The rising US dollar is making Asian currencies like the rupee, yen, and the yuan dip in value. This could be a temporary surge as the USD slipped south each time it touched the 99 mark this year.