RBI continues dollar-buying spree, accumulates $16 billion since Feb

Central bank purchased $7.7 bn in April, the most in two years, and $7.37 bn in May

The Reserve Bank of India (RBI) acquired $16 billion from the spot market between February and May this year, becoming a net buyer of US dollars in the period.

The central bank purchased $7.7 billion in April, the most in two years, and $7.37 billion in May.

It sold $25.5 billion on 2023-23 on a net basis to support the rupee following foreign exchange market volatility linked to the war in Ukraine and rate hikes by the US Federal Reserve.

RBI’s outstanding net forwards book fell to $19.27 billion in May, compared to $23.6 billion at the end of March.

Also Read: RBI bought $750 million on net basis from spot forex market in March

The RBI's foreign exchange reserves declined considerably in 2022 due to the Ukraine war and the Federal Reserve’s monetary tightening cycle. Reserves dropped to $100 billion until October of the same year. Revaluation, triggered by a stronger US dollar, significantly contributed to this decrease. During this period, the central bank intervened in the foreign exchange market by purchasing the greenback to mitigate excessive volatility in the rupee, which had depreciated around 10 percent against the US dollar in 2022.

As of December 30, 2022, India's foreign exchange reserves were at $562.8 billion. They rose by around $33 billion in the first six months of 2023. The foreign exchange reserves surpassed the $600 billion mark in the week ended May 12, primarily due to the rise in foreign currency assets.