RBI Deploys $44.5 Billion to Stabilize Rupee in October
In a significant effort to safeguard the Indian rupee, the Reserve Bank of India (RBI) spent $44.5 billion from its foreign exchange reserves in October 2024. This marked one of the highest single-month expenditures by the central bank to stabilize the currency amidst global economic turbulence and increased market volatility.
Global Pressures Impacting Rupee Stability
The rupee faced heightened pressure in October due to multiple external factors. Persistent geopolitical tensions, rising crude oil prices, and monetary tightening by major global economies caused capital outflows and impacted the currency’s stability. The intervention by the RBI aimed to curb excessive volatility in the forex market and bolster investor confidence.
Experts highlighted that such interventions were crucial given the challenging external environment. “By intervening decisively, the RBI prevented the rupee from breaching key psychological levels, which could have led to broader financial instability,” noted market analysts.
Impact on Forex Reserves
India’s foreign exchange reserves, which stood at $585 billion by the end of October, saw a notable dip following the intervention. However, analysts assert that the move was essential to maintain macroeconomic stability and prevent a sharp depreciation of the rupee. Despite the drawdown, the reserves remain robust compared to global peers.
The rupee’s performance showed relative stability during the period, trading within a controlled range against the US dollar, thanks to the central bank’s proactive measures.
Balancing Currency Stability and Policy Goals
The RBI’s approach aligns with global central banks’ practices of using forex reserves to manage currency stability during periods of heightened economic uncertainty. Moving forward, the central bank is expected to continue a cautious and calibrated approach to ensure that interventions are effective without exhausting reserves significantly.
As India navigates a volatile global economic landscape, the RBI’s active involvement underscores its commitment to financial stability and economic resilience, ensuring the rupee remains anchored amidst external pressures.
