On Friday, the Indian rupee hit a new low of 84.5075 against the US dollar, influenced by portfolio outflows and the strength of the US currency.Commerce Minister Piyush Goyal stated on Friday that India’s currency is one of the least volatile among major currencies, even as the rupee has repeatedly reached its historical lows.Speaking virtually at an event organized by the India Foundation in Bengaluru, Goyal said, “The Indian rupee is among the least volatile of major currencies, and India’s foreign exchange reserves, currently at $657 billion, rank among the top five in the world.”
It’s important to note that India experienced its fastest weekly decline in foreign exchange reserves last week, dropping by over $17 billion. This suggests that the Reserve Bank of India (RBI) has been selling dollars to support the local currency.Additionally, news agency Reuters reported that the RBI took the unusual step of instructing some banks to reduce their long positions in the dollar-rupee pair, aiming to curb speculative positions as the currency hits record lows.
While the RBI had previously prevented banks from increasing their long positions in the dollar-rupee, it has not asked them to reduce these positions in recent years. This action adds to the RBI’s toolkit for foreign exchange intervention, which includes regular dollar sales in spot and non-deliverable forward markets.Besides asking banks to cut back on speculative bets, the RBI also advised them to avoid buying spot dollars for arbitrage trading between the local over-the-counter spot market, futures, and non-deliverable forward (NDF) markets. During the same event, Finance Minister Nirmala Sitharaman highlighted that gig economy startups are among India’s most significant innovations, as they promote a model of ‘responsible capitalism’ for ‘Brand India.’
