Story
Reserve Bank of India Shifts to Net Forex Buyer in June with $561 Million Purchase
The Reserve Bank of India (RBI) became a net purchaser of US dollars in the spot foreign exchange market in June, buying $561 million, according to data released in its latest monthly bulletin on Tuesday. This marks a notable reversal from the previous two months of significant net sales.
A Reversal in Market Intervention
The central bank's data showed a shift in its currency market operations. In June, the RBI's activity included:
- Gross purchases of $30.89 billion
- Gross sales of $30.33 billion
This net buying position contrasts sharply with its stance in the preceding months. The RBI was a net seller of $6 billion in May and $8.9 billion in April, when it was actively intervening to support the national currency.
Context: Rupee Stabilization and Capital Inflows
AdThe change in the RBI's strategy followed a period of pressure on the Indian rupee, which fell to a record low of 96.96 per US dollar in May amid rising oil prices linked to Middle East tensions. In response, the central bank introduced a series of policy measures in early June that successfully attracted capital and stabilized the currency.
Between June 8 and August 21, these measures helped draw approximately $73 billion in capital inflows, the bulletin noted. A significant portion of these funds was attributed to a zero-cost hedging facility offered to banks for their overseas foreign currency borrowings.
Forward Book and Gold Reserves
The RBI also reduced its exposure in the forward markets. The central bank's net outstanding forward dollar sales stood at $103.3 billion at the end of June, down from $106.7 billion at the end of May.
Meanwhile, the country's gold reserves remained unchanged. The RBI reported holding 880.52 metric tons of gold, a level maintained since May 22.
Read next
More on Forex
Polish Zloty Hits 11-Month Low Against Euro on Energy Price Pressure
The Polish zloty weakened to 4.410 against the euro, its lowest point since November 2023, as rising energy prices and caution ahead of a U.S. Federal Reserve decision weighed on the currency.
Sterling Slips as Dollar Strengthens Ahead of Fed Decision and UK Budget
The British pound lost ground against a resurgent U.S. dollar on Wednesday as market attention shifted from tech sector volatility to upcoming central bank decisions and the UK budget announcement.
Eurozone Bond Yields Climb as French Fiscal Concerns Return Ahead of Fed, ECB Decisions
Yields on French and German government bonds rose as relief from a ratings affirmation for France proved temporary, with investors refocusing on fiscal challenges and awaiting key policy verdicts from the U.S. Federal Reserve and the European Central Bank.
Canadian Dollar Slips as Markets Await Bank of Canada, Fed Decisions
The Canadian dollar edged lower against its U.S. counterpart, snapping a seven-day winning streak as investors adopted a cautious stance ahead of Wednesday's key interest rate announcements from both the Bank of Canada and the U.S. Federal Reserve.