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RBI’s big Gamble - How India Defended the Rupee Below 90
Facing sharp depreciation pressures, the Reserve Bank of India (RBI) mounted strong forex intervention to arrest the rupee’s slide, lifting it from a record low of 91.075 per USD (Dec 16) to around 89.27.
The defence was led by large dollar sales via state-run banks, supported by speculative short-covering, with estimates suggesting the RBI may have spent $15–25 billion from reserves in December alone, contributing to a visible dip in foreign exchange reserves (FOREX).
India’s reserves, which stood near $640 billion earlier in 2025, have been gradually drawn down to smooth volatility rather than target a fixed level.
Currency defence has spillovers for bonds: yields remain range-bound amid RBI liquidity actions, including ₹1.45 trillion injected through OMOs and forex swaps.
With cumulative Repo rate cuts of 125 bps in 2025 and foreign bond outflows persisting, the RBI is signalling a clear priority—financial stability and orderly rupee adjustment over aggressive easing, anchoring confidence in India’s macro framework under managed float regime.
The defence was led by large dollar sales via state-run banks, supported by speculative short-covering, with estimates suggesting the RBI may have spent $15–25 billion from reserves in December alone, contributing to a visible dip in foreign exchange reserves (FOREX).
India’s reserves, which stood near $640 billion earlier in 2025, have been gradually drawn down to smooth volatility rather than target a fixed level.
Currency defence has spillovers for bonds: yields remain range-bound amid RBI liquidity actions, including ₹1.45 trillion injected through OMOs and forex swaps.
With cumulative Repo rate cuts of 125 bps in 2025 and foreign bond outflows persisting, the RBI is signalling a clear priority—financial stability and orderly rupee adjustment over aggressive easing, anchoring confidence in India’s macro framework under managed float regime.