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Rupee Asia’s Weakest Performer: RBI Forward Book Impact

3 June 20251 min read
BANKING & FINANCERupee Asia’sWeakest Performer:RBI Forward BookImpact3 June 2025safalsetu.com

Why in the news

While other emerging Asian currencies strengthened, the rupee barely moved. The lag was tied to how RBI is managing foreign-exchange reserves and forward dollar commitments.

Key facts

  • RBI let forward contracts expire and bought dollars in the spot market to restock reserves, which may weigh on the rupee.
  • June 2: rupee near ₹85.40 per dollar, up 0.2%, after Q4 GDP growth of 7.4%.
  • Foreign portfolio outflows added pressure.
ItemLevel
FX reserves, May 23, 2025$693 billion
Record high (September 2024)$705 billion
Forward exposure up to 3 months$15 billion
Forward exposure 3 months to 1 year$37.8 billion

Policy outlook

  • RBI wants to rebalance reserves without leaning on forwards, keeping a buffer against global and geopolitical shocks.
  • Governor Sanjay Malhotra allows more market-driven moves but still manages the currency.

Exam angle

  • Net short forward position means a commitment to sell dollars later.

Test yourself

1. What was RBI's net short forward dollar position in April 2025, as noted in the rupee performance report?

It stood at $73 billion, down from $88.8 billion in February.

2. India's foreign exchange reserves peaked at $705 billion in which month and year?

The all-time high of $705 billion was recorded in September 2024.

3. How did RBI prefer to rebuild reserves while the rupee lagged Asian peers?

RBI let forwards expire and bought dollars in the spot market.