Weighted moves: RBI's shock therapy restores stability to the forex market

After falling sharply against the US dollar in December and January, the rupee has remained stable since the Reserve Bank of India’s (RBI’s) policy repo rate cut on February 7.

 

The Indian currency’s rapid fall from 85 to 86 in just 16 days, and from 86 to 87 in another 15 days, highlights the volatility in the foreign-exchange market during those months. In contrast, it had taken 478 days for the rupee to weaken from 84 to 85 per dollar.

 

Between late 2022 and September 2024, the rupee remained largely stable. This led to debates about whether such stability was