The Reserve Bank of India (RBI) has sold a significant amount of dollars in the foreign exchange market, with total sales crossing the $43.2 billion mark as of February 2024. This exceeds the total dollar sales for the entire fiscal year 2025, highlighting the central bank’s efforts to stabilize the Indian rupee amidst high volatility.
The rupee has been experiencing significant fluctuations against the US dollar, with a decline of over 10% in the past year. The RBI has been intervening in the foreign exchange market to prevent a sharp depreciation of the currency, which could have negative consequences for the economy, including higher import costs and inflation.
The dollar sales by the RBI are aimed at reducing the supply of dollars in the market, thereby increasing the value of the rupee. The central bank has been using its foreign exchange reserves to sell dollars, which has resulted in a decline in the reserves from $633 billion in September 2021 to around $590 billion currently.
The RBI’s intervention in the foreign exchange market is not only aimed at stabilizing the rupee but also at maintaining financial stability. A sharp decline in the currency could lead to a decline in investor confidence, which could have negative consequences for the economy.
The dollar sales by the RBI have been significant, with the central bank selling $43.2 billion in the first 11 months of the fiscal year. This is higher than the total dollar sales of $34.6 billion in the entire fiscal year 2023. The RBI’s intervention in the foreign exchange market is expected to continue, given the ongoing volatility in the currency market.
The RBI’s actions are also aimed at preventing a sharp decline in the rupee, which could make imports more expensive and lead to higher inflation. The central bank has been using a combination of monetary policy tools, including interest rates and foreign exchange intervention, to maintain financial stability and control inflation.
Overall, the RBI’s dollar sales are a significant development, highlighting the central bank’s efforts to stabilize the rupee amidst high volatility. The RBI’s intervention in the foreign exchange market is expected to continue, given the ongoing uncertainty in the global economy and the currency market. The central bank’s actions will be closely watched by investors and policymakers, as they have significant implications for the Indian economy and financial markets.