RBI is seen to be likely selling dollars to support the rupee

The RBI has a long-established pattern of two-sided smoothing in USD/INR, leaning against depreciation through spot dollar sales, typically executed via state-run banks as its customary agents, and through the forward book when it wants to limit the drain on headline reserves. The tell that intervention is active rather than suspected is a cluster of offers from those banks around a level the market has learned to treat as defended, followed by confirmation in the weekly reserves data and the forward book disclosures that arrive with a lag. In past episodes of sustained INR pressure, the sequence has run from spot smoothing to forwards to drains on system liquidity, with the sterilisation cost showing up in money market rates and, if persistent, in operation twist-style actions or liquidity injections. The transmission to fixed income runs through the rupee liquidity that dollar sales absorb: heavy intervention tightens banking system liquidity and steepens the short end unless offset. Worth watching are the forwards leg of the intervention, the pace of reserve drawdown in the weekly data, and whether the defence concentrates at a round level, which historically defines the range until fundamentals or the dollar leg force a reset.