RBI sold $3.6B in June to stabilize rupee
What's the story
The Reserve Bank of India (RBI) sold $3.6 billion in June, in a bid to stabilize the depreciation of the Indian rupee (INR). The local currency closed at 85.47 per dollar during the month, a slight improvement from its opening value of 85.50/$1. In July, the real effective exchange rate (REER) remained stable at 98.35, indicating that the rupee is undervalued and potentially enhancing India's export competitiveness.
Market intervention
Highlights of RBI's foreign exchange reserves
The RBI's monthly bulletin revealed that the central bank sold $3.66 billion in the spot foreign exchange market in June. This was after buying $1.76 billion from the same market in May. The bulletin also noted that in June, the RBI bought $1.16 billion and sold $4.83 billion, This highlights its active role in managing currency fluctuations through the strategic buying and selling of foreign exchange reserves on the spot market to stabilize the rupee's value against global currencies.
Currency pressure
Current account deficit and forex reserves
The INR faced pressure in June due to uncertainties related to US tariffs. Despite this, India's external sector remained resilient with a modest current account deficit and forex reserves sufficient for 11 months of imports. The RBI bulletin noted that even with a slight depreciation against the US dollar in July, the rupee remained one of the least volatile currencies among major Emerging Market and Developing Economies (EMDEs) during this period.