India’s central bank sold $8 billion in US Treasuries in April and May as part of its intervention strategy in the currency market to prop up the rupee.
The Reserve Bank of India’s holdings fell to $148.9 billion as of end-May from $157 billion in March, data from the department of the Treasury showed. That coincided with net sales of $8.25 billion of the greenback in the domestic spot market in the same period, according to RBI data.
Despite the RBI’s presence, the rupee lost 3.3 percent against the dollar in those months as foreign funds exited high-yielding emerging markets for safer havens amid rising US interest rates. The local currency remains Asia’s worst performer this year.
Data from the Institute of International Finance showed India experienced a significant slowdown in capital flows. Its quarterly capital flows decreased to $6 billion in the second quarter of 2018 from $26.3 billion in the first quarter of 2018.
That slowdown and the RBI’s intervention in the currency market has seen foreign exchange reserves drop to $404 billion, down from a record $426 billion in mid-April.
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