A stronger rupee, shrinking dollar reserve: The balancing act facing RBI
The Reserve Bank of India is implementing measures to stabilize the rupee after it hit record lows against the US dollar. The central bank is balancing currency intervention with the need to maintain foreign exchange reserves.
Why it matters
Currency volatility impacts India's import costs, particularly for oil, and influences the broader economic stability of the nation.
Rupee has had a rough ride this year, sliding nearly 6% against the US dollar and hitting one record low after another. But after coming dangerously close to the 97-per-dollar mark, the currency has clawed its way back to around 94, helped by intervention from the Reserve Bank of India (RBI).Rupee had plunged to a record low of 96.96 in May and came close to breaching the 97 mark again earlier this month. It has since recovered around 2%, with the RBI stepping in to cool dollar demand.Earlier this week, rupee strengthened by 82 paise to 94.96 per dollar on the interbank order matching system, gaining nearly 0.7% from its previous closing, in a single session.As rupee continues to face a series of factors weighing it down, geopolitics, trade issues, dollar demand and more, the central bank rolled out a support system for the currency.
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