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In order to do that, the central bank probably offered a bit more premium to the banks,
hence driving up the 12-month implied yield on the forwards, traders said.
The RBI’s official stance is that it doesn’t target an exchange-rate level but intervenes to
contain volatility. The central bank doesn’t comment on its day-to-day foreign exchange
operations.
As the implied yields on the forwards get higher though, there is more incentive for
carry traders to be short the dollar and long the rupee, Banerjee wrote in a note. If RBI
intervention ends up doing that, then it could be a self-defeating move, he wrote.
The 12-month implied yield on the forwards rose 52 basis points to around 4.51% in
June.