RBI’s Record Forex Intervention in November 2024

In November 2024, the Reserve Bank of India (RBI) sold a record $20.2 billion in the foreign exchange market to stabilize the rupee amid significant foreign portfolio investor (FPI) outflows. This intervention increased the RBI’s net short position in the forward market to $58.9 billion by the end of the month, up from $49.18 billion in October.

Key Details

Spot Market Activity: The RBI purchased $30.8 billion and sold $51.1 billion in the spot market during November, indicating aggressive intervention to support the rupee.

Rupee Depreciation: Despite these efforts, the rupee depreciated by 0.48% against the US dollar during the month.

FPI Outflows: The intervention was prompted by heavy FPI outflows, with foreign investors net selling $2.1 billion worth of Indian equities in November.

Dollar Strength: The US dollar strengthened during this period, partly due to the Federal Reserve signaling fewer rate cuts than expected, with a 25 basis point reduction in early December, contrary to the anticipated 50 basis point cut.

Comparative Analysis

First Half of FY 2024-25: In contrast to the first half of the financial year, where the RBI was a net buyer, purchasing $8.52 billion in the spot market, the central bank became a net seller by November, offloading $20.9 billion.

Forward Market Position: The forward market deficit of $58.9 billion in November aligns with expectations, reflecting the RBI’s strategy to manage volatility amid global economic uncertainties.

Summary of the news