RBI Skips Dollar Purchases in July After 11 Years Amid Rupee Depreciation

In a decisive move to counter rupee depreciation, the Reserve Bank of India (RBI) refrained from purchasing any US dollars in July 2025. This marks the first zero-dollar purchase month since February 2014, as the central bank shifted focus to stabilising the currency.

Rupee Depreciation Triggers RBI Intervention

In July 2025, the RBI did not purchase any US dollars; instead, it sold $2.54 billion in the spot forex market to manage the rupee's steep decline. The rupee fell by 2.23% during the month, the sharpest monthly fall so far in 2025. Previously, in May, the rupee dropped 1.21%, while January and February witnessed falls of 1.16% and 1.02%, respectively.

This defensive strategy indicates a deviation from the central bank’s usual approach of dollar accumulation to support reserves. Instead, efforts were directed towards currency stabilisation.

Foreign Exchange Reserves Dip by $10.87 Billion

Because of the absence of dollar purchases and active selling, India’s foreign exchange reserves fell from $6,99,736 million on July 4 to $6,88,871 million on August 1, registering a decline of $10.87 billion. These reserves comprise foreign currency assets, gold holdings, special drawing rights (SDR), and the reserve position with the International Monetary Fund.

Fluctuations in the value of non-US currencies like the Euro, the Pound, and the Yen also contributed to the change in dollar-denominated assets.

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Geopolitical and Trade Factors Add Pressure

Multiple global and domestic factors contributed to rupee volatility. The imposition of a 50% tariff by the US on Indian goods from August 27, along with ongoing geopolitical tensions involving Russia, Ukraine, Israel, and Iran, affected investor confidence and capital flows. Additionally, outflows by foreign investors added to the strain on the rupee.

Conclusion

With the RBI stepping in to sell rather than buy dollars for the first time in over 11 years, the policy shift underlines growing concern over currency volatility. The July intervention underscores efforts to stem rupee losses amid global uncertainty and declining reserves.

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