RBI Sold $6.1 Billion in Forex Market in May Amid Global Volatility

The Reserve Bank of India (RBI) was a net seller of $6.1 billion in the foreign exchange market in May, data released on Wednesday showed, as heightened volatility in global energy markets and geopolitical tensions weighed on emerging-market currencies, including the rupee.

The central bank purchased $22.2 billion and sold $28.3 billion during the month, resulting in a net sale of $6.104 billion, according to the RBI's July Bulletin. In April, the RBI had sold a net $8.944 billion in the forex market.

The intervention data suggest the RBI remained active in the currency market through May, a period marked by sharp swings in crude oil prices and renewed concerns over the conflict in West Asia.

The RBI's net outstanding forward dollar sales rose to a record $106.66 billion at end-May, compared with $95.30 billion at end-April, indicating a further increase in the central bank's forward market position.

In the same bulletin, the RBI said India's external sector remains steady, with an improving outlook supported by foreign investment inflows, even as the global economy faces elevated uncertainty from geopolitical tensions and supply-chain pressures.

The central bank said the domestic economy had navigated external uncertainties well, supported by healthy demand conditions and resilient industrial and services activity. It also noted that the uneven progress of the southwest monsoon could pose risks to food prices, although comfortable foodgrain stocks should provide a cushion against inflationary pressures.

"Amidst these uncertainties, India remains among the fastest-growing major economies across the globe and has been able to sustain the momentum in economic activities through June. Both industrial and services sector indicators remained firm. The farm sector is witnessing uneven southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks," the RBI said in the bulletin.

The bulletin added that foreign exchange reserves remain comfortable, providing cover for more than 10 months of goods imports and around 88.5% of external debt outstanding as of end-March 2026. It also said India's key external vulnerability indicators remained well anchored.

The RBI said the momentum in external trade had been sustained, with exports and imports recording strong growth in the first quarter of 2026-27. It added that the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement and progress on other bilateral trade agreements could provide a further boost to trade.

"External vulnerability indicators also remained sound. Recovery of foreign investments in recent months shows a revival of confidence in the economy," the RBI said.

Data released earlier this month showed that merchandise exports rose 16% year-on-year to $129.32 billion during April-June 2026-27, while imports increased 18% to $270.15 billion, resulting in a trade deficit of $37.42 billion, up from $20.85 billion a year earlier.

The bulletin also said India's external debt-to-GDP ratio remained above 20% in March 2026, broadly unchanged from a year earlier, while the reserves-to-external debt ratio remained above 90%.

The RBI's latest assessment comes at a time when markets are closely watching the central bank's currency operations, crude oil prices and capital flows for clues on the rupee's trajectory and the broader external-sector outlook.