The Indian rupee’s depreciation since February 27 is comparable to other currencies and outperforms those that appreciated significantly from April 2, 2025, to February 27, 2026, according to SBI Research. During this period, the rupee depreciated by 6.4%, while the dollar index also decreased by 6%. This contrasts with most currencies appreciating against the dollar, suggesting that relying on the rupee as a shock absorber may be overstated.
The RBI’s efforts to rationalize banks’ open positions have led to a notable divergence between the Onshore and Offshore markets. Indian banks tend to be long onshore and short offshore, while foreign banks exhibit a different trend. With foreign exchange reserves exceeding $700 billion, India has the capacity to deter speculative activities and intervene to stabilize the rupee.
SBI Research highlighted that India’s current reserve levels are equivalent to over 10 months of imports, with short-term debt below 20% of reserves, allowing flexibility for market interventions to support the rupee. However, volatile capital flows and high oil prices pose risks in the near term, prompting recommendations for policy actions, such as establishing a special dollar window for oil marketing companies to address daily demands.
