RBI Net Buys $561M in Forex in June as Rupee Stabilizes

RBI Net Buys $561M in Forex in June Amid Rupee Stability

The Reserve Bank of India (RBI) recorded a net purchase of $561 million in the foreign exchange market during June. This marks a reversal from prior months' net sales, signaling a proactive approach to currency management and contributing to the Indian rupee's recent stabilization.

Market Operations and Rupee Performance

In June, RBI's operations involved buying $30.89 billion and selling $30.33 billion. This contrasts with net sales of $6 billion in May and $8.9 billion in April. The rupee reached a record low of 96.96 per dollar in May. It has since stabilized following capital inflows, notably triggered by RBI policy measures in early June.

Capital Inflows and Market Adjustments

Between June 8 and August 21, the RBI attracted nearly $73 billion in capital inflows, primarily from a zero-cost hedging facility for banks. Concurrently, the RBI's net outstanding forward dollar sales decreased to $103.3 billion by June end from $106.7 billion in May. Gold holdings remained unchanged at 880.52 metric tonnes.

Conclusion

The RBI's strategic shift to net forex purchases and success in attracting substantial capital inflows have been crucial in stabilizing the Indian rupee, underscoring the central bank's active role in market equilibrium.

FAQ

Q: What was the RBI's primary action in the forex market in June?
A: The RBI executed a net purchase of $561 million in the foreign exchange market.

Q: How did this compare to previous months?
A: The RBI was a net seller in May and April, selling $6 billion and $8.9 billion respectively.

Q: What impact did RBI's actions have on the Indian rupee?
A: The actions contributed to the Indian rupee's stabilization after it hit a record low in May.

Source: Investing.com