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26th May 2023 (6 Topics)

RBI become a net seller of US dollars in FY2023

Context

The Reserve Bank of India (RBI) became a net seller of US dollars in fiscal year 2023, after being a net purchaser for three consecutive years.

Key Highlights:

  • The Reserve Bank of India (RBI) sold $25.52 billion in the spot foreign exchange market.
  • The RBI sold dollars to reduce volatility in the rupee, which has been under pressure due to the Russia-Ukraine war and interest rate hikes by the US Federal Reserve.

Why did the RBI become a net seller of US dollars?

  • The RBI sold the greenback to prop up the rupee, which had depreciated due to higher import bills and foreign investors pulling out money from the domestic market.
    • If not, the rupee would have depreciated to 84-85 levels against the US currency.

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