The rupee weakened to an all-time low of 87.95 a dollar in the early hours on Monday, but managed to pare most of its losses due to strong intervention by the Reserve Bank of India (RBI). The rupee closed at 87.48, marginally weak from its previous close of 87.43 on Friday.
Most Asian currencies were weaker in the wake of the US government announcing fresh plans to impose 25% tariffs on steel and aluminium imports into the US. The offshore Chinese renminbi lost 0.2% to 7.31 during the day. The dollar index stood at 108.2, having climbed from Friday’s close of
“We opened at a record low, and closed just four-five paisa weaker from the previous close. Such a move has come after a long time. The RBI intervened twice, once at 87.95/$1 levels, and the second time at 87.60/$1 levels. We estimate the intervention to be around $2-3 billion,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
Governor Sanjay Malhotra in his policy statement of Friday said that the foreign exchange intervention was intended to smooth excessive and disruptive volatility, and that the policy has remained consistent over the years.
“Our interventions in the forex market focus on smoothening excessive and disruptive volatility rather than targeting any specific exchange rate level or band. The exchange rate of the Indian Rupee is determined by market forces,” governor Sanjay Malhotra said in his statement after the RBI monetary policy review Friday.
The RBI intervened heavily in the foreign exchange market during the third quarter of this fiscal year, but interventions were muted since late December - early January.
“We estimate there has been significant forex intervention from the RBI since October 2024, with net selling of about $116.5 billion, or about 18.9% of forex reserves,” said Sonal Verma, chief India economist at Nomura.
Verma estimates RBI's spot foreign exchange intervention to be about $63.2 billion.
Outflows from Indian equities have also weighed on the rupee, as foreign portfolio investors sold over $7.7 billion from Indian stocks and bonds.
Source Name : Economic Times