The Reserve Bank of India (RBI) intervened in both onshore and offshore currency markets this month to shore up the rupee, which has been sliding toward a record low, according to people familiar with the matter.
The rupee hit 87.89 per dollar last week, narrowly avoiding its all-time low, after U.S. President Donald Trump doubled tariffs on Indian goods to 50% on Aug. 6 in retaliation for New Delhi’s purchases of Russian oil. Economists warn that a weaker rupee could worsen imported inflation and weigh on the country’s fragile economic recovery.
This marked intervention signals a possible departure from the RBI’s cautious stance under Governor Sanjay Malhotra, who assumed office in December. The rupee has fallen over 2% this year, ranking among Asia’s worst-performing currencies, with roughly half of the slide occurring in the past two weeks following Trump’s tariff announcement.
“The recent RBI intervention seems to have more to do with their dislike of the volatility in the exchange rate,” said Dhiraj Nim, currency strategist at Australia and New Zealand Banking Group Ltd. The rupee held steady at 87.62 per dollar on Monday.
Sources said the RBI was active in offshore markets ahead of domestic trading hours last week, using non-deliverable forwards to influence the currency without directly selling large amounts of dollars. This strategy, also employed last year, was accompanied by a sharp $9.3 billion drop in forex reserves to $689 billion in the week ending Aug. 1 — the steepest fall since November. While part of the decline reflects valuation changes in global currencies, it also points to increased market activity by the central bank.