RBI Steps Up Dollar Sales to Support the Rupee Amid Record Weakness

India’s central bank, the Reserve Bank of India (RBI), has markedly intensified efforts to defend the rupee by selling over $5 billion in both onshore and offshore markets this August, according to media reports. This marks a departure from the more restrained approach seen under Governor Sanjay Malhotra in recent months, and may represent the highest monthly net dollar sales since January.

Pressure on the Rupee

The rupee recently slipped to ₹87.89 per U.S. dollar, close to its all-time low, following sharp tariff increases from the United States. On August 6, U.S. President Donald Trump raised duties on Indian goods to 50% in response to India’s purchases of Russian oil. The rupee has declined more than 2% in 2025 so far, with half that fall occurring over the last two weeks.

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RBI’s Strategy

To stabilise the currency, the RBI has actively engaged in the non-deliverable forward (NDF) markets, particularly before domestic trading begins at 9 a.m. in Mumbai. This allows the RBI to influence the rupee’s performance without depleting its foreign exchange reserves through large-scale spot market interventions—mirroring tactics used in 2024 to dampen volatility.

Implications and Outlook

The central bank’s re-engagement reflects growing concern over continued depreciation, especially amid geopolitical tensions and external tariff pressures. While these interventions may support the rupee in the short term, long-term effectiveness will depend on broader global dynamics, including trade policies and market sentiment.

Conclusion

The RBI has escalated its intervention in August, selling at least $5 billion to support the rupee near historic lows. Employing both spot and NDF market tools, the central bank signals renewed determination to contain volatility. This decisive stance comes amid mounting trade tensions and underscores the RBI’s priority to maintain macroeconomic stability.