RBI's Foreign Exchange Strategy: Navigating Volatile Markets
The Reserve Bank of India (RBI) net acquired USD 7.409 billion from the spot market in February. This marked the second month of net purchases following seven months of sales. Rising geopolitical tensions prompted the RBI to introduce new prudential measures, despite the rupee depreciating against the dollar.
- Country:
- India
The Reserve Bank of India's recent activities in the foreign exchange market indicate a strategic shift. According to its latest bulletin, the RBI net purchased USD 7.409 billion in February, maintaining this trend for the second month in a row after a prolonged period of net sales.
The rupee's movement has been significantly impacted by geopolitical tensions, particularly in West Asia. While there was an appreciation in early February due to favorable trade news between India and the US, increased unrest led to depreciation in March.
To stabilize the currency and curb speculative activities, the RBI implemented a prudential measure on March 27, 2026, capping authorized dealers' net open positions in INR to USD 100 million. This action aims to ensure orderly market conditions amidst volatile economic signals.
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