Key Facts
• The Reserve Bank of India (RBI) sold at least $5 billion this month.
• The intervention aimed to curb the rupee’s depreciation, nearing a record low of 87.89 per dollar.
• The rupee has fallen over 2% this year, underperforming among Asian currencies.
• U.S. tariffs on Indian imports doubled to 50% following a presidential order.
• RBI’s dollar sales could reach the highest monthly level since January.
• India’s foreign reserves dropped $9.3 billion to $689 billion as of August 1.
• RBI intervened multiple times in offshore markets before domestic trading hours.
• The rupee’s decline risks import inflation and pressures economic recovery.
• RBI’s approach under Governor Malhotra, appointed in December, shows a shift.
• Currency reserve changes also reflect valuation adjustments, not solely dollar sales.
Summary
The Reserve Bank of India (RBI) sold at least $5 billion in foreign exchange markets this month to stabilize the rupee, which recently approached a record low of 87.89 per dollar. The rupee’s depreciation, exacerbated by U.S. tariff hikes on Indian imports, has raised concerns about import inflation and economic recovery. Under Governor Malhotra, the RBI’s intervention strategy appears to have shifted, with multiple offshore market actions reported. India’s foreign reserves fell by $9.3 billion to $689 billion as of August 1, marking the largest decline since November 2024. While the drop reflects valuation changes, the RBI’s dollar sales are a significant factor. The rupee has declined over 2% this year, underperforming other Asian currencies, with recent losses accelerating due to tariff-related pressures.
