The RBI sold a net $20.2 billion in November and $15.2 billion in December, data from the central bank’s February bulletin showed.
“Our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian Rupee is determined by market forces,” Governor Sanjay Malhotra said earlier in the month.
The local currency depreciated by 3.2% against the US dollar since November 6, 2024, the day the presidential election results were announced in the US, largely mirroring the 2.4% appreciation in the dollar index during the same period.
The rupee, like all other major currencies, came under further pressure following Trump’s plan to levy reciprocal tariffs on goods from other countries in a structural revision in its trade policy.
The sale of dollars by RBI led to a squeeze in the country’s forex stockpile with the foreign exchange reserves falling to $631 billion at the end of January. The all-time high was $704.885 billion seen in the first week of September last year.The current level of forex reserves provides 10-months of import cover.”A strong dollar, driven by US economic resilience and trade policy pivots, could exacerbate capital outflows from emerging economies, push risk premiums higher, and intensify external vulnerabilities,” RBI economists said in the state of economy report.
