The Indian rupee has shown little movement over the past three weeks, leading some traders to suggest that the Reserve Bank of India (RBI) is tightening its control over the currency. This month, the one-month volatility in the dollar-rupee pair has fallen to its lowest level for the year, with the currency remaining within a narrow range and struggling to break through the 89-per-dollar threshold after recently hitting new lows.
According to a Bloomberg News report, the RBI has amassed short dollar positions of at least $15 billion in the non-deliverable forwards market in recent weeks to defend the rupee. This action represents a shift under Governor Sanjay Malhotra, who has allowed the rupee to float more freely since assuming office in December, contrasting with the tighter controls implemented by his predecessor, Shaktikanta Das.
Michael Wan, a senior currency analyst at MUFG Bank, noted, “The RBI is probably uncomfortable with the pace of weakness seen over the past few months. It’s probably a signal to the market in the near term that RBI doesn’t want dollar/rupee to cross 88.80 levels, but it’s not sacrosanct by any means.”
The RBI did not respond to queries requesting comments on the matter. In the most recent monetary policy statement, Malhotra indicated that the central bank is closely monitoring the rupee’s movements and will take “appropriate steps” as necessary.
Thus far in 2025, the rupee has depreciated by 3.6 percent, making it the worst-performing currency in Asia. This decline has contributed to a correction in the currency’s overvaluation against its trading partners, bringing it closer to a fair value.
Dhiraj Nim, a foreign exchange strategist at Australia and New Zealand Banking Group Ltd. in Mumbai, stated, “The RBI doesn’t like a volatile exchange rate, especially in times where risks can invigorate speculative interests.” He added that a fluctuating currency with a depreciation bias poses a significant constraint on domestic monetary policy, where flexibility is already limited.
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Published on October 13, 2025.
