India’s rupee has remained relatively stable over the past three weeks, leading some traders to speculate that the Reserve Bank of India (RBI) is once again exerting control over the currency. The one-month volatility of the dollar-rupee exchange rate has dropped to its lowest level this year, with the currency struggling to surpass the 89-per-dollar threshold after hitting recent lows.
Reports indicate that the RBI has taken short positions of at least $15 billion in the non-deliverable forwards market in an effort to support the rupee. This approach under the leadership of Governor Sanjay Malhotra marks a departure from the previous policies of his predecessor, Shaktikanta Das, who maintained a tighter grip on the currency.
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 inquiries seeking comment on these actions.
In the recent monetary policy announcement, Malhotra emphasized that the central bank is closely monitoring the rupee’s movements and will take “appropriate steps” as necessary. The rupee has declined by 3.6% this year, making it the worst-performing currency in Asia. This depreciation has contributed to correcting its overvaluation against trading partners, rendering it more fairly valued.
Dhiraj Nim, a foreign exchange strategist at Australia and New Zealand Banking Group Ltd. in Mumbai, explained, “The RBI doesn’t like a volatile exchange rate, especially in times where risks can invigorate speculative interests.” He added that the central bank is aiming to support economic growth and that a volatile currency with a depreciation tendency poses significant constraints on domestic monetary policy.
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Published on October 13, 2025.
