RBI Sells Nearly $7 Billion to Defend Rupee Amid Record-Low Pressure Against US Dollar
The Reserve Bank of India (RBI) undertook one of its largest single-day foreign exchange interventions in recent months by selling approximately $7 billion in the currency market to support the rupee, which had come under intense pressure after approaching its record low against the US dollar. The aggressive intervention helped stabilize the domestic currency and signaled the central bank’s determination to curb excessive volatility in the foreign exchange market.
The rupee had weakened sharply due to a combination of rising global crude oil prices, geopolitical tensions in the Middle East, and sustained demand for the US dollar from importers and institutional investors. As India imports nearly 90% of its crude oil requirements, higher oil prices significantly increase demand for dollars, putting downward pressure on the rupee. Traders reported that state-run banks sold dollars on behalf of the RBI throughout the trading session, increasing the supply of dollars and easing depreciation pressure on the Indian currency.
Following the intervention, the rupee rebounded from levels close to its historic low and strengthened to around ₹95.50–95.55 per US dollar, registering its strongest weekly performance in nearly four months. The recovery was aided by a softer US dollar globally and declining international crude oil prices, although market participants attributed the bulk of the rupee’s gains to the RBI’s decisive intervention.
According to bankers and foreign exchange dealers, the RBI has changed its approach in recent weeks by intervening more aggressively and even targeting periods of lower market liquidity, where relatively smaller trades can have a greater impact on exchange rate movements. Over a three-day period, the central bank is estimated to have sold between $8 billion and $9 billion, indicating a lower tolerance for rapid depreciation of the rupee than in previous episodes.
The intervention has been supported by stronger foreign currency inflows generated through policy measures announced earlier this year. Special schemes encouraging foreign currency deposits from non-resident Indians (NRIs), along with incentives for overseas investments, have significantly improved India’s external liquidity position, providing the RBI with greater flexibility to use its foreign exchange reserves to stabilize the currency when required.
Economists believe the RBI is not attempting to defend a fixed exchange rate but is instead seeking to prevent disorderly market movements that could fuel imported inflation, increase corporate hedging costs, and undermine investor confidence. By intervening decisively during periods of heightened volatility, the central bank aims to maintain orderly functioning of the foreign exchange market while allowing the rupee to adjust gradually in line with economic fundamentals. With global oil prices, US monetary policy, and geopolitical developments continuing to influence currency markets, the RBI’s actions are expected to remain closely watched by investors and financial institutions in the weeks ahead.
