RBI Intervenes as Rupee Hits Record Low, Net Forward Sales Reach $106.6B
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Why in news
The RBI intervened in the forex market as the Indian Rupee hit a record low of 96.96 per USD in May 2024 due to global economic pressures.
Background
The RBI reported a net outstanding forward dollar sales of $106.6 billion by end-May 2024. In May 2024, the RBI purchased $22.2 billion and sold $28.3 billion in foreign exchange to stabilize the currency.
Facts for Prelims
- FactRupee record low: 96.96 per USD in May 2024
- FactNet outstanding forward dollar sales: $106.6 billion by end-May 2024
- BodyRBI: The central bank manages forex reserves and intervenes to stabilize the exchange rate
- FactRBI May 2024 transactions: Purchased $22.2 billion, Sold $28.3 billion
For Mains
Q. Analyze the factors influencing the volatility of the Indian Rupee and evaluate the effectiveness of RBI's interventionist measures in maintaining exchange rate stability.
Dimensions to cover in your answer
- External shocks: Impact of rising global oil prices and fluctuating international bond yields on domestic currency value
- Policy instruments: Effectiveness of tax incentives on foreign debt investments in attracting capital inflows
- Liquidity management: Balancing the trade-off between maintaining forex reserves and stabilizing the Rupee's purchasing power
Keywords: Exchange rate volatility · Forex intervention · Capital inflows · Monetary policy · External shocks
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