RBI Becomes Net Buyer of US Dollars in February Amid Strengthening Rupee
RBI a net buyer of US dollars in February
The Economic Times
Image: The Economic Times
In February, the Reserve Bank of India (RBI) purchased a net $7.4 billion in US dollars, reversing January's net sales of $2.4 billion. This shift is attributed to a strengthening rupee following the announcement of a trade deal between India and the United States.
- 01RBI's net dollar purchases reached $7.4 billion in February.
- 02This marks a significant shift from net sales of $2.4 billion in January.
- 03The strengthening rupee is linked to the India-US trade deal announced in early February.
- 04The real effective exchange rate (REER) of the rupee decreased to 91.23 in March.
- 05A REER below 100 suggests the rupee is undervalued, enhancing export competitiveness.
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In February, the Reserve Bank of India (RBI) became a net buyer of $7.4 billion in US dollars, a notable change from its net sales of $2.4 billion in January. This turnaround is attributed to a strengthening Indian rupee, which followed the announcement of a trade deal between India and the United States in early February. The real effective exchange rate (REER) of the rupee, which measures its value against a basket of six major currencies, fell to 91.23 in March from 92.45 in February. A REER below 100 indicates that the currency is undervalued, which can boost export competitiveness for Indian goods in the global market.
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The RBI's net dollar purchases may lead to a stronger rupee, potentially lowering import costs and benefiting consumers. This can also enhance the competitiveness of Indian exports, positively impacting exporters.
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