RBI Steps Up Rupee Support as Dollar Sales Reach at Least $8 Billion

India’s central bank, the Reserve Bank of India (RBI), significantly increased its foreign exchange intervention last week, selling an estimated $8 billion to $15 billion to support the rupee, according to six bankers. The intervention helped the currency strengthen to 94.2850 per dollar on September 3, its strongest level in more than two months.

The RBI’s policy measures, including discounted hedging facilities for overseas borrowings and free hedging facilities for banks raising overseas foreign-currency deposits, have attracted more than $136 billion in inflows. These inflows have provided the central bank with greater room to sell dollars, while also draining excess rupee liquidity from India’s banking system.

India’s foreign exchange reserves stood at a record $740.8 billion as of August 21, with estimates suggesting they may have since crossed $750 billion. However, analysts expect the rupee’s recovery from its May low of 96.96 to remain limited, with Goldman Sachs forecasting a relatively narrow trading range rather than a sustained appreciation cycle.

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