The period from June to October was a particularly volatile one for the rupee, with the domestic currency weakening to an all-time low of 83.29 per US dollar in October.

Sales of the US dollar by the RBI played a key role in reining in the volatility faced by the rupee in the face of aggressive rate hikes by the US Federal Reserve and elevated commodity prices amid the Ukraine war.

However, from November onward, signs of slowing inflation in the US led to hopes of the Fed reducing the quantum of rate hikes, which led to the dollar weakening and boosted emerging market currencies like the rupee. This would likely have provided the RBI the room to replenish its reserves through dollar purchases, analysts said.

“India’s foreign exchange reserves increased by US$ 28.9 billion since September-end and stood at US$ 561.6 billion as on January 6, 2023, covering more than nine months of imports projected for 2022-23,” the RBI staff wrote in the Bulletin.

In November, the RBI’s outstanding net forwards purchase book of US dollars also sharply increased to $8.49 billion from $241 million in October. The increase shows that the central bank had spread out its dollar buying interventions to the forwards segment too, analysts said.