RBI’s Dollar Position Rises as Rupee Hits Record Low — What It Means for India’s Currency

In September, the Reserve Bank of India (RBI) increased its short dollar position in the offshore market by USD 6 billion, reaching USD 59.4 billion. This marks the first rise in seven months and signals the central bank’s active intervention to control the rupee’s depreciation.

Why RBI Increased Its Dollar Position

The RBI’s move to expand its short dollar position shows that the central bank is using all available tools to prevent a sharp fall in the rupee. By selling dollars in both the offshore and local markets, the RBI tries to balance the supply-demand gap and reduce volatility in the currency market.

Rupee Hits Record Low

In September, the Indian rupee fell to a record low of Rs 88.89 per US dollar. Despite a globally weaker US dollar helping most Asian currencies recover, the Indian rupee remains Asia’s worst-performing currency in 2025. Factors such as rising US bond yields, high crude oil prices, and persistent foreign fund outflows have put continuous pressure on the rupee.

RBI’s Intervention in the Forex Market

The central bank has been selling dollars in the domestic spot market to slow the rupee’s decline. A short dollar position means the RBI is effectively betting on a future rise in the rupee’s value by selling dollars now and planning to buy them back later at a cheaper rate.

Impact on India’s Forex Reserves

Frequent dollar sales by the RBI can lead to a temporary decline in India’s foreign exchange reserves. However, this is often seen as a necessary step to stabilize the currency and control imported inflation caused by a weak rupee.

What Lies Ahead

Experts believe the RBI will continue to intervene whenever required to maintain market stability. As global conditions remain uncertain, the central bank’s focus will be to prevent excess volatility rather than defend a specific rupee level.

Key Takeaways

• RBI’s short dollar position rose by USD 6 billion to USD 59.4 billion in September.
• This is the first increase in seven months, showing RBI’s efforts to stabilize the rupee.
• The rupee touched an all-time low of Rs 88.89 per dollar in September 2025.
• Despite a weaker US dollar globally, the rupee remains Asia’s worst performer this year.
• RBI continues selling dollars in local and offshore markets to support the currency.

Conclusion

The RBI’s rising short dollar position highlights its determination to curb the rupee’s slide amid global market pressures. With the rupee struggling against the dollar, India’s central bank remains proactive to ensure financial stability and protect the economy from excessive currency volatility.