Rupee is bucking the trend of rallying currencies across emerging Asia, with central bank forays into the market seen preventing any gains.

The currency has edged lower against the dollar, while the Indonesian rupiah and Malaysian ringgit have soared more than 4% in August. That’s a turnaround for the rupee, which was the region’s best performer in the first half of 2024 after the Hong Kong dollar.

Asian currencies rallied this month on bets the Federal Reserve may soon start cutting interest rates. Even while the rupee underperformed, it remains one of the least volatile currencies in the world thanks to the central bank’s tight grip on it — a factor that helped burnish the appeal of Indian assets in a year when a volatile dollar wreaked havoc in many foreign-exchange markets.

The Reserve Bank of India’s intervention is probably targeted at preserving exchange -rate competitiveness, according to UBS Investment Bank. An outflow of $2 billion from stocks likely weighed on the currency. The RBI has reiterated in recent months its presence in both the spot and forwards market.

“The broader driver seems to be authorities’ two-way FX smoothening,” said Rohit Arora, head of Asia FX & rates strategy at UBS. Blunting volatility might not be the main motive here with implied volatility being among the lowest in emerging Asia, he added.