Reserve Bank net sold $31.98 bn to defend rupee in Jan-Oct 2025, Pg13

Key Highlights:

• The Reserve Bank of India (RBI) net sold $31.98 billion to stabilize the rupee from January to October 2025, a shift from net purchases of $23.03 billion in the same period of 2024.
• Despite interventions, the rupee depreciated by 3.3% between January and October 2025, compared to a 2.2% decline in the corresponding period of 2024.
• Gross dollar sales by the RBI jumped 35% to $207.96 billion in the first 10 months of 2025, with average monthly sales around $21 billion.
• India's forex reserves stood at $693.3 billion as of December 19, 2025.

Detailed Insights:

• The RBI's intervention strategy in 2025 focused on managing rupee volatility rather than defending a specific exchange rate level, reflecting a more tactical approach.
• Increased reliance on forward and swap markets is evident, with net forward dollar sales reaching $63.6 billion at the end of October 2025, a significant rise from $49.18 billion in October 2024.
• Higher gross dollar sales indicate increased spot forex interventions by the RBI to manage rupee volatility amidst global pressures and a strong US dollar.
• The RBI's shift towards greater use of forward interventions allows for efficient management of rupee liquidity and reduces abrupt drawdowns in the spot market.
• The January-March 2025 period saw the most activity, with the RBI purchasing $135.69 billion and offloading $134.1 billion, with January recording the highest monthly sale at $60.28 billion.

Key Concepts Involved:

• Forex Reserves: Foreign currency assets held by a central bank.
• Spot Forex Intervention: Direct buying or selling of currency in the spot market by a central bank.
• Forward Contracts: An agreement to buy or sell an asset at a specified future date and price.