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The Reserve Bank of India reported a net purchase of USD 7.409 billion in the spot forex market in February, marking its second straight month of dollar buying after a prolonged selling streak. The move follows sustained interventions between June and December, when the central bank sold large amounts of foreign currency to stabilise the rupee. While the rupee saw brief strength after an interim India–US trade development, it later weakened due to global tensions. The RBI also introduced measures to curb speculative activity and maintain orderly market conditions amid continued volatility.
The Reserve Bank of India (RBI) recorded a net purchase of USD 7.409 billion in the spot foreign exchange market in February, according to its latest monthly bulletin. This comes as the central bank continued its shift back to buying dollars after an extended period of intervention through net sales. Advertisement
On a gross basis, the RBI purchased USD 21.403 billion and sold USD 13.994 billion during the month. This follows a net purchase of USD 2.526 billion in January, indicating a gradual reversal in strategy after sustained selling in the preceding months.
Between June and December, the central bank had consistently intervened in the forex market through net sales to manage volatility in the rupee. The data showed net sales of USD 10.02 billion in December, USD 9.710 billion in November, USD 11.877 billion in October, USD 7.910 billion in September, USD 7.695 billion in August, USD 2.540 billion in July, and USD 3.661 billion in June.
Currency movements remained mixed during the period. The rupee strengthened in early February following the announcement of an interim trade agreement between India and the United States. However, it weakened in the following month as geopolitical tensions in West Asia escalated. The RBI noted that while implied volatility in currency options moderated in the second half of the financial year compared to the first half, it remained elevated due to persistent global uncertainties and risk-off sentiment.
To maintain stability in the foreign exchange market, the central bank introduced a prudential measure on March 27, 2026, restricting the net open position in INR of authorised dealers in the onshore deliverable market to within USD 100 million at the end of each business day. The RBI indicated that this step was aimed at limiting excessive speculative positions and reducing systemic risks.
Despite these interventions, the rupee depreciated by 6.2 per cent against the US dollar in the second half of FY26. In terms of the 40-currency real effective exchange rate, the rupee also weakened by 3.3 per cent between September and February, mainly due to a decline in its nominal effective value.
The RBI has historically stepped in during periods of sharp currency movement to smooth volatility and manage liquidity conditions. The recent return to net dollar purchases suggests a calibrated approach as external pressures and global uncertainties continue to influence currency markets.
Source PTI
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