Reserve Bank of India Buys Net $561 Million in June, Reversing Selling Trend

The Reserve Bank of India (RBI) shifted its foreign exchange strategy in June, becoming a net purchaser of U.S. dollars for the first time in three months. The central bank bought a net $561 million in the spot market, according to data released in its monthly bulletin on Tuesday.

A Shift in Intervention

The net purchase reflects a significant change from the central bank's activities in the preceding months. The RBI was a heavy net seller of dollars in April and May as it sought to defend the Indian rupee.

• June Activity: The RBI purchased $30.89 billion and sold $30.33 billion.
• Previous Months: This contrasts with a net sale of $6 billion in May and $8.9 billion in April.

The data encompasses the central bank's market interventions, swap maturities, and absorption of capital inflows.

Market Context and Rupee Stabilization

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The RBI's return to net buying follows a period of intense pressure on the Indian rupee, which fell to a record low of 96.96 per dollar in May. The currency's decline was driven primarily by rising oil prices linked to geopolitical tensions in the Middle East.

However, the rupee has since stabilized, supported by significant capital inflows prompted by RBI policy measures introduced in early June. The central bank received nearly $73 billion in inflows between June 8 and August 21, largely from a zero-cost hedging facility for banks' overseas foreign currency deposits.

Forward Book and Gold Reserves

In the derivatives market, the RBI's net outstanding forward dollar sales decreased to $103.3 billion at the end of June, down from $106.7 billion at the end of May. The central bank's physical gold holdings remained unchanged at 880.52 metric tonnes, a level maintained since May 22, according to the bulletin.