The Reserve Bank of India’s dollar short forward positions rose $6 billion to $59.4 billion in September – up 11% on month, according to data released on Friday. This is the first time in seven months the RBI’s position in the short forward market has increased.
The rise in short positions can be attributed to the regulator’s increased FX interventions to defend rupee, according to market participants. In the current financial year, the currency has depreciated 3.8% and in September, the rupee fell 0.7%.
“The $6 billion increase in RBI forward position reflects the increased FX intervention to protect rupee and I think they have again relied on forward because it also does not put pressure on the banking system’s liquidity,” said Ritesh Bhansali, deputy CEO at Mecklai Financial Services.
The RBI has been cutting their forward positions since February, when it peaked at $88.8 billion. In September 2024, the RBI’s forward position was $14.6 billion.
In October, the banking regulator aggressively intervened in both onshore and off-shore markets, which brought down the rupee to 87 level. However, it could not sustain for long due to month-end importer demand and hawkish policy by the US Federal Reserve. As a result, the rupee fell by around 50 paise to 88.70 on Thursday. On Friday, the domestic currency ended at 88.77, down 7 paise from the previous close.
“I expect the forward position to increase further in October as intervention was more during the month,” said Bhansali. He further said, “the RBI was protecting the currency around the 88.80 level earlier. It is uncertain whether they will continue defending that level this time. RBI keeps on defending a certain level. However, the strengthening dollar index will likely limit aggressive intervention.”
The rupee has been under pressure since while due to tariff uncertainties and geo-political tensions. In September, higher gold prices and persistent equity outflows added to the pressure on the currency. It touched a record low of 88.80 in September. Source said that the RBI is uncomfortable about rupee on a free-fall due to high speculation.
