The Reserve Bank of India (RBI) made a major intervention in the foreign exchange market in March, by buying a net $14.36 billion in the spot segment, as per date published in the central bank’s latest monthly bulletin released on Wednesday.
According to the bulletin, the RBI bought $41.52 billion while selling $27.16 billion during the month. This marks a notable shift from February, when the RBI was a net seller to the tune of $1.6 billion in the spot market.
Rupee strengthens in March amid US dollar fall
The Indian rupee strengthened by 2% in March, triggered by a combination of softening in the US dollar and a because of constant flow of foreign investments. These factors played a major role to a series of short-covering by traders who had earlier held bearish positions on the rupee.
During the month, the rupee traded in a wide range between 85.39 and 87.44 against the US dollar. Heightened activity and volatility were seen in the currency markets.
Along with its spot market operations, the RBI’s total outstanding forward sale position was at $84.35 billion at the end of March. It recorded a slight decline from $88.7 billion measured at the end of February.
The Central Bank of India frequently intervenes in both the spot and forward markets to balance the Rupee and to control excessive fluctuations. On Thursday, Rupee dropped 2 paise to 85.61 against the US dollar in the early morning trade.
These interventions are part of the RBI’s broader plan to ensure systematic movement on the currency markets.
