RBI Expands $16.5 Billion Short Dollar Positions to Defend the Rupee Amid Persistent Pressure

The Reserve Bank of India (RBI) has significantly raised its short dollar positions in the offshore derivatives market as part of its strategy to defend the rupee from sustained depreciation. In September 2025, the RBI’s net short position in maturities of up to one month surged to $16.5 billion, compared with $5.9 billion in August. 

This $6 billion expansion in the central bank’s forward book marks the first notable increase in seven months, reflecting a stronger intervention stance to stabilise the local currency.

Rupee Trades Near Record Low

The Indian rupee closed at 88.77 against the US dollar, edging close to its all-time low of 88.80 recorded in late September. The currency has slipped approximately 1% week-on-week as of early November 2025, pressured by a firm US dollar and steady importer hedging. 

Market participants expect the rupee to trade within the 88.50-89.10 range in the near term, with mild downward pressure likely to persist as global dollar strength continues to dominate market sentiment.

RBI’s Multi-Channel Intervention Strategy

The RBI has been actively deploying a combination of measures to manage volatility and prevent the rupee from breaching its record low. These include direct dollar sales through state-owned banks and the accumulation of short positions in the non-deliverable forward (NDF) market. 

In mid-October, the central bank intervened aggressively, briefly strengthening the rupee to 87.60 before it weakened again. Market analysts expect renewed intervention if the rupee tests 88.80, as sustained depreciation could trigger broader currency market volatility.

Read More: Finance Ministry Review Highlights India’s Economic Strength in September 2025!

Market Dynamics and Capital Flows

The rupee remains under pressure from strong dollar demand linked to merchant flows, NDF expirations, and global economic trends. Despite these challenges, India’s forex reserves remain robust at $700.2 billion as of September 26, 2025, sufficient to cover over 11 months of merchandise imports. 

Encouragingly, foreign investors have infused over $1 billion into Indian government bonds in recent weeks, marking the third consecutive month of inflows exceeding $853 million, indicating continued investor confidence in India’s macroeconomic fundamentals.

Conclusion

The RBI’s decision to expand its short dollar positions underscores its determination to maintain currency stability amid global headwinds. While the rupee hovers near record lows, strong reserves, consistent capital inflows, and targeted interventions signal that India remains well-positioned to navigate near-term market volatility effectively.

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