RBI's record $67.4B forward short signals unwavering rupee defence

The Reserve Bank of India's forward dollar short position hit a record high in March, reflecting the central bank's stepped-up use of sell-buy swaps to contain the rupee's slide. The net short position stood at $67.4 billion at the end of March, up from $57.3 billion a month earlier, according to data from the RBI's monthly bulletin. That reading is the highest since the central bank started publishing the series in 2015.

The rupee has been under pressure from a strong dollar and portfolio outflows. The currency touched a record low of 87.95 against the greenback in March before recovering to around 87.20 after the RBI stepped in. The central bank sells dollars in the spot market and simultaneously agrees to buy them back at a future date. The structure lets the RBI absorb dollar demand without draining foreign-exchange reserves permanently.

Traders said the RBI's strategy has shifted from holding a specific line to managing the pace of depreciation. The swaps drain rupee liquidity and cap volatility. India's foreign-exchange reserves stood at $642.6 billion as of April 18, down from a peak of $704.9 billion in September.