RBI sold $1.9 bn in spot forex in January

The Reserve Bank of India sold $1.9 billion in the foreign exchange market in January after buying dollars for three straight months, data from the central bank showed.

In January, the rupee had largely been trading stronger owing to dollar inflows from foreign investors into the local debt market. Foreign investors had bought $2 billion in that month. However, towards the end of the month, the currency weakened after the US Federal Reserve announced further reduction to its stimulus programme.

The rupee had traded around 61.60-62.50/$ in the beginning of January and fell to 63.10/$ after the Fed’s announcement.

In October-December, RBI had bought $17 billion from the forex market. The RBI had provided banks swap windows through which banks could swap the dollars raised through foreign currency non-resident deposits at a swap rate far lower than the prevailing market rate. The swap windows had garnered $34 billion for RBI.