Overview
- RBI Governor Sanjay Malhotra said the central bank will “do whatever is required” to ensure orderly forex market movements, a pledge made publicly on May 25 and repeated across official interviews.
- The RBI has drawn down headline reserves by about $30–$38 billion since February and recently offered a three‑year dollar/rupee buy‑sell swap to provide dollars without draining onshore liquidity.
- The rupee fell roughly 6–7% since late February, hit intra‑month lows near Rs 96.9 on May 20, and traded in the mid‑95s after volatility from fresh US strikes on Iran pushed Brent toward $98–$100 per barrel.
- Economists are split on strategy: some, including Montek Singh Ahluwalia, say modest depreciation can help export competitiveness, while analysts warn that reserves and short‑term intervention cannot fix structural problems such as large trade deficits and weak FDI.
- Policy trade‑offs matter for households and firms because a weaker rupee raises the cost of imported fuel and goods, could lift inflation, and increases hedging costs for companies while the RBI prepares for the June monetary policy meeting.