RBI buys $1 bn in forex mart

Curbs rupee appreciation, rolls over forward deals.

The Reserve Bank of India (RBI) is estimated to have mopped up around $1 billion on Tuesday by intervening in the spot as well as forward markets, according to currency dealers.

The central bank bought spot dollars to check the rupee's appreciation, while it also entered into sell-spot-dollar-buy forward-dollar swaps to roll over its earlier forward contract scheduled to mature this month-end, said dealers.

"There were two transactions that took place on Tuesday. One was the sell-buy swap, which was RBI's rollover. The other was the central bank's forward dollar purchases after buying dollars in the spot market," a dealer at a state-run bank said. RBI prevented the rupee from rising above the 39.91 level, dealers said.

"They definitely bought more than $500 million on Tuesday," the dealer at the state-run bank said, adding the RBI was not only rolling over previously bought forward dollars, but was also initiating fresh buy positions in spot and forward markets.

This week, currency dealers had expected the central bank to roll over its forward contracts to prevent further tightness in the cash-dollar market.

Meanwhile , RBI is estimated to have bought illiquid government bonds in the 10-year segment on Tuesday worth nearly Rs 700 crore, a move many see as a multi-pronged one.

"It's a conjecture, but I don't see why else the bond market would be bullish at this time," said a senior treasury official of a private bank.

Market is abuzz with talk that the central bank purchased 7.49%, 2017 bond along with 8.07%, 2017 paper, 7.59%, 2016 bonds and 7.27%, 2013 paper on Tuesday.

Gilt prices had bounced back from a steep fall, with the benchmark 7.99%, 2017 bond, which lost Rs 1.50 between February 8 and 22, regaining 50 paise on Monday and ending marginally down on Tuesday.