RBI sold $5B this month to support Indian rupee
What's the story
The Reserve Bank of India (RBI) has sold at least $5 billion in US dollar this month across onshore and offshore currency markets. This move comes as the Indian rupee continues to weaken toward its record low. The intervention is a potential shift from RBI's previously cautious approach under Governor Sanjay Malhotra, who took office in December last year.
Currency performance
Rupee's depreciation and its implications
The Indian rupee has depreciated over 2% this year, making it one of Asia's worst-performing currencies. Last week, the currency fell to 87.89 per dollar, just shy of its all-time low. The depreciation could lead to inflation and further complicate India's already fragile economic recovery. The recent decline in value is primarily due to US President Donald Trump's decision to double tariffs on Indian goods as a penalty for its purchases of Russian oil.
Market tactics
RBI's intervention and foreign-exchange reserves
Multiple times last week, the RBI was spotted entering the offshore market just before domestic currency trading started at 9:00am IST. This was done through non-deliverable forwards, a method that lets the central bank influence the rupee's value without directly selling large amounts of USD. The latest data on foreign-exchange reserves also indicate more intervention from RBI with its stockpile falling by $9.3 billion, the biggest drop since November, to $689 billion in the week ending August 1.