The Reserve Bank of India intensified its intervention in the currency markets in September, offloading nearly $7.91 billion net to contain the rupee’s steep slide, according to official data released on Monday. The central bank bought $2.2 billion and sold $10.11 billion during the month as the domestic currency weakened to a then-record low of 88.80. This follows net sales of $7.7 billion in August.
Trade Frictions Deepen Pressure on Rupee
The Indian currency has been grappling with persistent downward pressure, largely driven by escalating trade frictions between India and the United States and a notable rise in imports of precious metals such as gold and silver. With negotiations for a bilateral trade pact still stalled, market sentiment has remained fragile. The rupee touched a fresh lifetime low of 89.49 on November 21, marking a 4.5% decline so far this year.
Rise in Forward and Futures Market Activity
The RBI also expanded its presence in the derivatives market, with its net outstanding forward and futures dollar sales rising to $59.4 billion at the end of September—the first such increase in half a year. The central bank routinely uses both spot and forward market operations to smooth excessive fluctuations in the exchange rate.
Governor Flags Tariff Impact
RBI Governor Sanjay Malhotra recently attributed the rupee’s weakness to punitive U.S. tariffs imposed on Indian exports. He added that progress toward a wide-ranging trade agreement with Washington would help ease pressure on India’s external balances and support currency stability.
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