RBI Steps Up Dollar Sales to Support the Rupee?

The Reserve Bank of India (RBI) has intensified its efforts to stabilise the rupee, selling over $5 billion across both onshore and offshore markets this month, as per news reports.

This marks a notable shift from its previously restrained stance under Governor Sanjay Malhotra. If the current pace continues, August could see the RBI’s largest monthly net dollar sales since January.

Pressure on the Rupee

The rupee recently slipped to 87.89 per dollar, just short of its all-time low, after US President Donald Trump doubled tariffs on Indian goods to 50% on August 6 in retaliation for India’s purchases of Russian oil. This depreciation, over 2% so far in 2025, half of it in the last two weeks, has placed the currency among Asia’s worst performers.

Strategy and Market Impact

News reports posted that the RBI has been active in offshore non-deliverable forward (NDF) markets, often intervening just before domestic trading opens at 9 a.m. in Mumbai. Using NDFs allows the central bank to influence the rupee’s direction without directly selling large quantities of dollars in the spot market. This approach mirrors strategies employed in 2024 when the RBI aimed to curb sharp volatility.

Decline in Forex Reserves

Latest data on India’s foreign-exchange reserves indicate a sharp $9.3 billion fall to $689 billion in the week ending August 1, the steepest weekly decline since November. While part of this drop is likely due to changes in global currency valuations, the figures also suggest increased RBI activity in currency intervention.

Also Read: RBI Proposes 15-Day Rule and Penalties for Delays in Settling Deceased Customers’ Accounts!

Conclusion

The RBI’s aggressive dollar sales highlight growing concerns over currency stability amid global trade tensions and tariff hikes from the US. While the measures may offer temporary relief to the rupee, sustained external pressures, including geopolitical developments and shifts in global monetary policy, could continue to test the central bank’s resolve.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.