RBI Spends Over $10B to Defend Rupee Amid Dollar Pressure

In response to significant rupee depreciation pressure, the Reserve Bank of India has reportedly deployed over $10 billion from its forex reserves to stabilize the currency. The rupee had touched multi-year lows amid rising U.S. yields and geopolitical risk-off sentiment, sparking concerns of imported inflation and capital flight. RBI’s timely intervention calmed markets, reversing some of the volatility in currency and equity segments.

The RBI’s strategy included both spot market dollar selling and forward contract intervention. This multi-pronged approach helped reduce short-term speculative bets against the rupee while maintaining enough liquidity to support market confidence. Despite this, traders remain wary of a prolonged period of rupee weakness, especially if crude oil prices remain elevated or the dollar strengthens further.

The central bank has clarified that it does not target a specific exchange rate level but seeks to prevent excessive volatility. By ensuring that the rupee’s movement remains aligned with economic fundamentals, the RBI has sent a clear message to markets and investors that it is willing and able to act decisively. This could have a stabilizing effect on future FII flows, especially in debt markets.

In the longer run, India’s external sector resilience will depend on structural improvements. These include reducing dependence on energy imports, expanding forex-earning service exports, and further integrating Indian financial assets into global indices. While intervention helps manage immediate shocks, sustainable currency strength will only come from improved fundamentals.