India has used up about half of the more than $140 billion it mobilised through special measures to bolster its foreign exchange war chest earlier this year, highlighting pressure on the rupee and the central bank's determination to turn the tide.
The Reserve Bank of India's spot market dollar sales to support the local currency, alongside dollar-rupee sell/buy swaps aimed at absorbing surplus rupee liquidity in the banking system, are behind the drawdown, economists and FX traders across six banks said.
Pressure on the rupee from high oil prices, a recent surge in US Treasury yields and ongoing foreign equity outflows has compelled the RBI to step up intervention against local currency weakness, in order to limit knock-on risks to inflation and broader financial stability.
The RBI has deployed around $75 billion to $80 billion through spot dollar sales and dollar-rupee swaps since its special measures to attract foreign-currency inflows came into effect on June 8, three economists estimate.
Economists derived their estimates by adjusting weekly changes in India's foreign-exchange reserves, published by the RBI every Friday, to exclude revaluation effects.