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The Reserve Bank of India sold $7.8 billion in the spot market in December 2011 to prop up the sliding rupee.
Data from the central bank’s February bulletin shows that this is the highest amount it has sold in three years. According to this data, the bank did not intervene at all in the first six months of the fiscal. The RBI also sold $1.37 billion in the forward market in December.
Dollar sales by the RBI began in September 2011 and touched a new high in December, even as the rupee depreciated rapidly and touched a low of 54.30 to the dollar. Cumulatively, the RBI has sold $12.5 billion in this fiscal so far. Comparatively, it had sold just $760 million in fiscal 2010-11.
In mid-December 2011, the RBI announced a sheer of measures to curb rupee volatility, including restricting the rebooking of forward contracts and reducing the open positions of banks. There has since then been a slight relaxation of limits for some banks. It also deregulated the interest rates on NRE deposits. These measures have seen the rupee climb back to 49.35 currently.
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