India's Rupee Plunges Below Rs 91 per Dollar Amid RBI Forex Reserve Concerns

Indian Rupee Depreciates Below Rs 91 per Dollar

Market Update: The Indian rupee sank to a low of Rs 91 per dollar on March 2, marking a decline for the first time in a month. This depreciation has put the spotlight on the Reserve Bank of India's (RBI) $723.60 billion forex reserves, which have seen significant swings throughout the month.

RBI Forex Reserves: Despite the decline, traders and experts believe that the RBI has sufficient forex reserves to cover its import bill for a considerable amount of time. The central bank has been judiciously selling the US dollar in the last 10-15 trading sessions to protect the Rs 91 level and prevent any further depreciation.

RBI Intervention: The RBI is now expected to safeguard the psychological Rs 92 per dollar level and may continue selling the greenback in both the onshore and offshore non-deliverable forwards (NDF) market to maintain the current levels. The rupee touched a record low of Rs 91.98 in late January, just short of the Rs 92 mark.

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Forex Reserves and Net Short Dollar Position: As of February 20, the RBI's forex reserves stood at $723.60 billion, with a net short dollar position of nearly $62.3 billion as of December-end. This suggests that the RBI is looking to sell the dollar in the future to prevent any sharp fall in the rupee.

Market Outlook: The rupee's trajectory in the near-term will be closely tied to global sentiments, while the RBI will closely monitor any sharp movements. Although the RBI has sufficient firepower to defend the rupee, much will depend on how long global uncertainties will linger. The rupee was last trading at Rs 91.40 to the dollar, as compared to Rs 90.98 in the previous trading session.