Whalesbook
RBI's Sustained Dollar Intervention
The Reserve Bank of India (RBI) continued its active role in the foreign exchange market, reporting net dollar sales of $9.71 billion in November 2025. This figure, while a slight decrease from October's net sales of $11.88 billion, marked the sixth consecutive month of the RBI acting as a net seller of dollars. In November, the central bank purchased foreign currency worth $14.3 billion and sold $17.6 billion in the spot market. These interventions come as the RBI aims to cushion the rupee against depreciation and manage market sentiment.
Forward Market Activity and Overall FY26 Intervention
Beyond spot market operations, the RBI's presence in the forward market has also been substantial. By the end of November 2025, the central bank's net short position in the rupee forward market increased to $66.04 billion. For the first half of the fiscal year 2025-26 (April-September 2025), the RBI's net dollar sales amounted to $21.7 billion, a notable reduction compared to $85.11 billion sold during the same period in the previous fiscal year. However, the entire fiscal year 2024-25 saw record net dollar sales of $34.5 billion by the RBI, the highest since the 2008-09 global financial crisis.
Factors Driving RBI's Intervention
Analysts point to a confluence of factors compelling the RBI's sustained market actions. A primary driver is the need to offset pressures stemming from a challenging balance of payments position, which is anticipated to show a deficit for the second consecutive year [cite: Original Source A]. Compounding this are the effects of significant US tariffs, which have impacted India's export sector. These tariffs, some as high as 50%, have led to reduced Indian exports to the US and have been cited as contributing to weak sentiment and potential speculative activity against the rupee. The US tariffs announced in August 2025 have also coincided with foreign portfolio investors (FPIs) pulling out approximately Rs 95,000 crore from Indian equities.
Market Reaction and Rupee Performance
The persistent intervention by the RBI has not fully insulated the Indian Rupee from depreciation. On January 22, 2026, the rupee touched a fresh all-time low, trading as low as 91.72 against the US dollar in intraday trade and closing at 91.533. The currency has weakened by approximately 2.32% over the past month and 5.86% over the last 12 months. Analysts anticipate continued volatility, with some expecting the USD/INR to trade around 90.40 by the end of the first quarter of 2026. Despite recent intervention, the rupee's value is influenced by global geopolitical uncertainties and the pending trade deal with the US.
Historical Context and External Sector Resilience
While the RBI's dollar sales in FY25 were substantial ($34.5 billion net), the current fiscal year's half-year intervention ($21.7 billion) has been lower. This comes despite the fact that India's current account deficit (CAD) narrowed to $12.3 billion (1.3% of GDP) in the second quarter of FY2025-26, an improvement from $20.8 billion (2.2% of GDP) a year prior. This resilience in the CAD is partly attributed to strong services exports and remittances. However, broader balance of payments pressures and external headwinds from tariffs necessitate continued vigilance from the central bank.