The Indian central bank, the Reserve Bank of India (RBI), likely sold dollars in the market to prevent a further slide in the rupee’s value, according to traders. This intervention occurred amidst global economic pressures that affected the Indian currency.
Historical Context of RBI Intervention
The RBI has a history of intervening in currency markets. A notable instance was during the 2013 “Taper Tantrum.” At that time, the RBI aggressively sold dollars to stabilize the rupee when India faced significant capital outflows. The current situation has similarities to the economic conditions of 2013, prompting the central bank to act.
Recent Forex Reserve Trends
India’s foreign exchange reserves are substantial, but they decreased recently. They declined from a peak of over $640 billion in 2021 to around $620 billion. This decrease can be attributed partly to the RBI’s interventions in the currency market. This shows that the RBI is willing to use its reserves to protect the rupee from excessive depreciation.
