The Reserve Bank of India (RBI) has taken significant action in the foreign exchange market during June, demonstrating its commitment to managing currency volatility. According to recent data, the central bank executed a net sale of $3.66 billion in the spot forex market last month, highlighting its active role in stabilizing the Indian rupee.

June Forex Market Operations

The RBI's forex market intervention in June was characterized by:

• Total purchases of $1.16 billion
• Total sales of $4.82 billion
• Resulting in a net sale of $3.66 billion

This strategy marks a notable shift from May, when the central bank was a net buyer, purchasing $1.76 billion in the spot market.

Rupee Performance and Market Dynamics

Despite the RBI's interventions, the Indian rupee faced challenges in June:

• Depreciated by 0.2% against the U.S. dollar
• Underperformed compared to other Asian currencies
• Traded in a range of 85.30 to 86.89 against the dollar

Interestingly, this depreciation occurred against a backdrop of a broad dollar downtrend, suggesting specific pressures on the Indian currency.

Forward Market Position

The RBI's activities weren't limited to the spot market. In the forward market:

RBI's Currency Management Strategy

The central bank employs a dual approach to manage exchange rate volatility:

1. Spot market interventions
2. Forward market operations

This comprehensive strategy allows the RBI to effectively respond to various market pressures and maintain stability in the forex market.

Current Rupee Status

As of Thursday, the Indian rupee closed at 87.62 per U.S. dollar, reflecting the ongoing dynamics in the currency market.

The RBI's substantial net sale in June underscores its proactive stance in managing currency fluctuations. As global economic conditions continue to evolve, market participants will closely monitor the central bank's future interventions and their impact on the rupee's performance.

The Reserve Bank of India (RBI) has taken significant action in the currency markets, selling at least $5 billion worth of US dollars across onshore and offshore markets to support the weakening rupee. This intervention comes as the Indian currency approaches record lows, reflecting a potential shift in the central bank's approach to currency management.

Rupee Under Pressure

The Indian rupee fell to 87.89 per dollar, nearing its all-time low. This decline was precipitated by US President Donald Trump's decision to double tariffs on Indian goods to 50%, a punitive measure in response to India's purchases of Russian oil. The rupee has depreciated more than 2% this year, making it one of the worst-performing currencies in Asia.

RBI's Intervention Strategy

The central bank's intervention strategy included:

• Selling at least $5 billion worth of US dollars in both onshore and offshore currency markets
• Utilizing non-deliverable forwards in offshore markets to guide the rupee's trajectory

This approach marks a potential departure from the previously restrained stance under Governor Sanjay Malhotra, who assumed office in December.

Impact on Foreign Exchange Reserves

The intervention has had a notable impact on India's foreign exchange reserves:

This decline represents the steepest drop in foreign exchange reserves since November.

Recent Rupee Performance

The rupee's recent performance has been concerning:

• Over 2% depreciation year-to-date
• Approximately half of this decline occurred in the past two weeks

Factors Influencing Currency Weakness

Several factors have contributed to the rupee's weakness:

1. Increased US tariffs on Indian goods
2. India's purchases of Russian oil
3. Global economic uncertainties

The RBI's intervention underscores the challenges facing the Indian economy and the central bank's commitment to maintaining currency stability. As global economic pressures continue to mount, market observers will be closely watching the RBI's future actions and their impact on the rupee's value.