In February, RBI purchased $7.4bn in forex market

MUMBAI: Reserve Bank of India ramped up dollar purchases in Feb, signalling a shift to rebuilding forex reserves after the rupee stabilised following the US–India trade deal announcement in the same month.

Despite heavy spot purchases, net forward sales stood at $77.7 billion, indicating continued reliance on forward markets. While Feb did provide an opportunity for reserve rebuilding, a significant part of the reserves were depleted in March when the rupee came under pressure in the wake of the US-Iran conflict, which began on Feb 28.

According to the RBI Bulletin in April, the central bank was a net buyer of $7.4 billion in the over-the-counter (OTC) market, with gross purchases of $21.4 billion and sales of $14 billion, injecting Rs 66,881 crore into the system. In the futures segment, it stayed neutral, with zero net intervention, while trimming its outstanding net sales position to $522 million.

The intervention marked a sharp jump from Jan’s $2.5 billion, suggesting RBI moved quickly to absorb inflows as volatility eased. The rupee’s stability after the Feb 6 trade announcement likely boosted sentiment and triggered capital inflows, giving RBI space to accumulate reserves without pushing the currency higher.

This marks a reversal from Feb 2025, when RBI sold $1.6 billion to support the rupee, and from FY25, when it was a consistent net seller averaging $2.9 billion monthly.

Outward remittances dip in February

Outward remittances softened in Feb, falling 12.8% month-on-month to $2.3 billion, though they remained 19% higher than a year earlier and 5 per cent below the FY25 monthly average of $2.4 billion, suggesting a pause after recent strength.

Travel continued to dominate at $1.3 billion, accounting for 55.9 per cent of outflows, despite a 21 per cent sequential decline; it still rose 19.8 per cent on year but remained below its FY25 average.
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