MUMBAI, Sep 2: The Reserve Bank of India has intensified efforts to support the rupee amid pressure from rising crude oil prices and elevated US Treasury yields, while a surge in non-resident deposits has strengthened the country’s foreign exchange position.
The central bank has stepped up dollar sales around market hours as it seeks to contain excessive volatility in the domestic currency. The rupee recently moved to a two-month high above the 95-per dollar level despite challenging global conditions.
Brent crude prices have also risen sharply, increasing concerns over India’s import costs because of the country’s dependence on overseas oil supplies.
A significant boost to India’s external financial cushion has come from non-resident Indian deposits. Data cited in recent reports showed FCNR(B) deposits rising from $65.4 billion on August 21 to more than $100 billion by August 31.
The increase has been supported by concessional foreign-exchange swaps offered by the RBI, helping banks attract additional foreign-currency deposits.
India’s foreign exchange reserves stood at a record $729.3 billion, giving policymakers greater capacity to intervene in the currency market when necessary.
The stronger reserve position could provide additional protection against external market shocks while the central bank balances currency stability with broader financial-market conditions.