The rupee on Wednesday traded sideways and closed at a record low of 83.96 against the dollar amid reports that the Reserve Bank of India (RBI) dialled some large banks and asked them to refrain from enhancing their existing positions against the Indian currency.

The verbal nudge came as the central bank apparently did not want the rupee to slip below 84 per dollar which could have put more pressure on the local unit. At the inter-bank forex markets, the rupee opened at 83.97 to the greenback and slipped to the day’s low of 83.9725 after which it closed flat at 83.96.

A dealer from a local forex firm said the RBI’s move comes in the backdrop of the rupee hitting new lows in the past three sessions. The RBI wants banks not to bid for dollars for speculative purposes which could put pressure on the rupee, the dealer said.

The pressure on the rupee came on account of persistent selling by foreign portfolio investors (FPIs) and escalating tensions in West Asia. Provisional data from the bourses showed FPIs selling stocks worth ₹3,315 crore on Wednesday.

A Reuters report said officials from the RBI’s financial markets regulation and operations department called big banks, when the rupee was close to breaching the 84-level in the spot market.

The RBI often resorts to such informal calls to manage excessive volatility and curb undue speculation, and its requests are generally not ignored.

While the rupee fell to a record intra-day low, it is felt that the currency could have breached the 84 mark had it not been for the apex bank’s instructions.

“We expect the rupee to trade with a negative bias on a recovery in the dollar and geopolitical tensions in West Asia. However, positive global equities may support the rupee at lower levels,” Anuj Choudhary of Sharekhan by BNP Paribas said.

The mood was different in the equity markets which saw a sharp rebound following a global rally. This came after the Bank of Japan deputy-governor Shinichi Uchida said it will not hike rates during financial instability. His statement has reduced the chances of an increase in borrowing costs.

The BoJ’s recent move to raise interest rates had led to an appreciation in the yen, triggering a major selloff on Monday.

Back home, the Union government’s decision to restore indexation benefits on real estate transactions for land or building bought before July 23, 2024 improved sentiment.

At the BSE, the 30-share Sensex rallied 874.94 points to end at 79468.01.

During intra-day trades, it zoomed 1046.13 points to 79639.20.

The broader Nifty gained 304.95 points or 1.27 per cent to end at 24297.50.

In the broader market, the BSE midcap gauge rose 2.63 per cent and smallcap index by 2.39 per cent. Similarly, all the sectoral indices ended in the higher ground.

“Global markets experienced a notable rebound after the BoJ’s deputy-governor reassured that the central bank would not raise interest rates. The Indian market also witnessed broad-based buying across sectors, with the realty sector seeing a relief rally due to the reinstatement of indexation benefits,” Vinod Nair, head of research, Geojit Financial Services, said.