The Reserve Bank of India (RBI) sold a net of $7.7 billion in the spot foreign exchange market in August to curb volatility and support the Indian rupee. The currency slipped 0.68% during the month, breaching the 88-per-dollar mark for the first time. This reflected pressure from global factors, including a strong US dollar, and rising import costs in India.
According to RBI’s monthly bulletin, the central bank made no dollar purchases in August and sold $7.7 billion in the spot market. This represented a significant escalation from the net sale of $2.54 billion in July.
The intervention sought to address heightened volatility triggered by external economic signals. RBI's actions focused on smoothing out abrupt currency swings to foster orderly market conditions.
The Indian rupee depreciated 0.68% in August, closing at 88.1950 against the US dollar. It crossed the 88 level for the first time, underscoring the intensity of monthly pressures.
As of October 21, the rupee traded at 87.9275, showing a modest recovery. Market participants noted RBI's indirect support through state-run banks around the 88 threshold.
RBI’s net outstanding forward sales reached $53.36 billion by the end of August, a decline from $57.85 billion at July's close. This shift indicates proactive adjustments to forward commitments.
Forward operations enable RBI to address anticipated rupee pressures over future periods. They work alongside spot interventions to create a comprehensive defence mechanism.
RBI's moves unfolded amid global currency turbulence, soaring commodity prices, and expanding trade imbalances. India faced elevated costs for energy and metals imports during the period.
In September, imports surged, particularly in gold and silver, widening the trade deficit to $32.15 billion, a 13-month peak. These dynamics amplified downward forces on the rupee.
RBI’s $7.7 billion spot sales in August demonstrate its dedication to stabilising the rupee against formidable external headwinds. The breach of 88 per dollar necessitated robust action to mitigate risks of further erosion. Adjustments in forward positions and attention to trade deficits reinforce this proactive stance.
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Published on: Oct 20, 2025, 9:43 PM IST
Akshay Shivalkar
Akshay Shivalkar is a financial content specialist who strategises and creates SEO-optimised content on the stock market, mutual funds, and other investment products. With experience in fintech and mutual funds, he simplifies complex financial concepts to help investors make informed decisions through his writing.
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