Indian central bank likely defending rupee, conducting swaps to drain excess cash, traders say

MUMBAI, Sept 23 (Reuters) - The Reserve Bank of India likely intervened in the foreign exchange market on Wednesday, five traders said, continuing its interventions to support the currency as it navigates volatile oil prices and weak portfolio flows.

State-run banks were also spotted conducting dollar/rupee sell-buy swaps, the ⁠traders said, likely on the RBI's behalf and intended to drain excess rupee liquidity.

The rupee was at 95.7325 per dollar, down 0.1% from its close at 95.59 in the previous session.

Traders characterised the spot market intervention as intermittent, rather than anchoring the currency at ⁠a specific level.

Sustained central bank action through bond sales, foreign exchange swaps, and rupee defence has helped cut the banking system's liquidity surplus ⁠by more than half, bankers said.

Bank liquidity surplus stood at 4.44 trillion rupees ($46.38 billion) on Tuesday, ⁠the lowest in nearly four weeks and down 60% from its record high ⁠of 11.16 trillion rupees hit on September 6.

($1 = 95.7300 Indian rupees)

Reporting by Jaspreet Kalra and Dharamraj Dhutia; Editing by Rashmi Aich

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