India, a key member of the BRICS alliance, is reportedly offloading U.S. dollars in the forex market to shield its national currency, the rupee, from further depreciation. According to a Reuters report, the Indian rupee plunged to a historic low of 85.96 against the dollar on January 1, 2025. The decline rattled Indian markets, especially the import and export sectors, prompting swift intervention by the Reserve Bank of India (RBI).
State-run banks, acting on the RBI’s directive, have dumped millions of U.S. dollars to stabilize the rupee. This calculated move aims to mitigate the fallout from the rupee’s drop and curtail potential inflationary pressures on the Indian economy. The central bank is closely monitoring the forex markets to prevent any sharp downturns, with interventions reportedly becoming a norm in similar crises.
“This isn’t the first instance of India selling U.S. dollars to prop up the rupee,” a currency trader revealed under anonymity. The trader confirmed that the RBI is actively intervening to limit the damage caused by the rupee’s depreciation.
A stronger U.S. dollar poses a significant threat to India’s economy by inflating import costs, which could ripple across industries and hit consumers hard. With India’s reliance on imports for essential commodities like oil and electronics, the risk of inflation looms large. Conversely, exporters also face challenges as a volatile rupee disrupts long-term trade contracts.
This development underscores a growing trend among BRICS nations to reduce dependence on the U.S. dollar. The bloc, comprising Brazil, Russia, India, China, and South Africa, has been vocal about de-dollarization to bolster economic sovereignty.
As the rupee battles unprecedented lows, the RBI’s strategic maneuvers aim to safeguard India’s economic stability. However, the recurring need to sell U.S. dollars highlights the broader challenges of maintaining currency strength in an increasingly volatile global market.
Also Read: India Opposes BRICS Common Currency, Prefers US Dollar for Trade Stability
India’s bold stance in forex markets signals its resolve to prioritize national interests, but the sustainability of such interventions remains a point of debate.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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