Why RBI sold $7B last Friday
What's the story
The Reserve Bank of India (RBI) sold around $7 billion last Friday in a bid to defend the Indian rupee. This was one of its biggest direct interventions in months, according to Bloomberg. The RBI intervened in both onshore and offshore markets as the currency neared a record low, amid rising crude prices affecting Asian oil importers.
Market response
RBI's determination to support the rupee
The RBI's dollar sales were followed by further interventions over the next two sessions, which helped lift the rupee further away from its all-time low.
On Thursday, the currency traded at 95.7437 per dollar, about 1.3% off its record low.
The magnitude of these dollar sales highlights RBI's determination to support the rupee amid global market fluctuations and rising crude prices.
Strategic measures
Response to capital flow measures strong
The RBI's increased dollar sales come as its recent steps to boost capital flows are adding to the central bank's foreign currency buffers.
This gives it more ammunition to defend the rupee.
The response to these measures has been strong so far, with banks mobilizing $32 billion, RBI Governor Sanjay Malhotra told the Hindu BusinessLine earlier this week.
Reserve growth
India's foreign exchange reserves
India's foreign exchange reserves stood at $676.2 billion on July 17, having risen by over $9 billion in three weeks. The increase in these reserves further strengthens RBI's position to defend the rupee against market pressures.