Lunes Aug 11 2025 14:20
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According to sources familiar with the matter, the Reserve Bank of India (RBI) has been selling US dollars in both onshore and offshore foreign exchange markets this month in an attempt to support the Indian Rupee, which is nearing record lows. The value of dollars sold by the RBI is reportedly at least $5 billion.
This intervention comes in the wake of a significant weakening of the Rupee, which fell to 87.89 against the US dollar last week, just slightly above its all-time low. This decline coincided with U.S. President Donald Trump's announcement of doubling tariffs on some Indian goods to 50%, in response to India's purchase of Russian oil.
Why is the RBI Intervening?
The RBI's intervention aims to achieve several key objectives:
RBI's Strategy
The RBI is reportedly using instruments like Non-Deliverable Forwards (NDFs) to intervene in the offshore market, allowing it to influence the Rupee's exchange rate without needing to sell large quantities of dollars in the spot market. The central bank has frequently relied on this strategy in the past.
Potential Impact
The RBI's intervention is likely to provide some stability to the Rupee in the short term. However, the long-term effectiveness of these interventions depends on various factors, including the strength of the US dollar, developments in the global trade war, and the overall performance of the Indian economy.
Impact of US Tariffs
It's worth noting that President Trump's decision to increase tariffs on Indian goods has played a significant role in the Rupee's weakening. Analysts believe this move increases geopolitical risks and negatively impacts investor confidence in the Indian economy.
In conclusion, the Reserve Bank of India's intervention reflects its concern about the Rupee's weakness and its potential impact on the Indian economy. However, it remains to be seen whether these interventions will be sufficient to stabilize the Rupee in the long term, especially given ongoing global trade tensions.
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