RBI ramps up offshore currency market interventions to shield rupee

Core Viewpoint - The Reserve Bank of India (RBI) has intensified its interventions in offshore currency markets to support the depreciating rupee, which has become the worst-performing currency in Asia this year [1][2]. Group 1: RBI's Intervention Strategy - The RBI has accumulated short dollar positions of at least $15 billion in the non-deliverable forwards (NDF) market over the past two to three weeks [1]. - This marks a significant return to a market segment where the RBI had previously reduced its involvement over the past year [2]. - The central bank resumed interventions in the NDF market in August and increased operations in September, particularly in the one-month segment [4]. Group 2: Market Conditions and Currency Performance - The rupee is facing downward pressure due to record outflows from local stocks and concerns over punitive US tariffs, leading to fresh lows against the dollar [2]. - The local currency's one-month volatility against the dollar has decreased sharply this month, indicating a potential stabilization [4]. Group 3: RBI's Monitoring and Future Actions - RBI Governor Sanjay Malhotra stated that the central bank is closely monitoring the rupee's movements and will take "appropriate steps" as necessary, indicating a proactive approach beyond typical volatility management [3]. - The RBI's interventions in the NDF market allow it to influence the rupee's levels without depleting official reserves, providing a cost-effective method to stabilize the currency [5].