RBI has stopped buying dollars, it seems. In August 2014, it sold about $511 m of dollars, but bought $421 million of forwards, effectively staying flat on trade.
The USDINR went to about Rs. 60.9, up about 1%. The RBI hasn’t been buying, and FII figures for August were reasonably positive (Rs. 22,000 cr. or about $3.6 bn of net buying).
So sales must be from higher imports or higher debt borrowing by Indian companies.
August notwithstanding, the RBI has been buying a heck of a lot of dollars:
In terms of total outstanding forward exposure, we get data by maturity buckets,which shows the longer term maturity (approximately November 2016) at $25 billion (net sale), but is matched by forwards around 1 year of $26 billion (net purchase).
As we see the dollar strengthening against all global markets, we see the RBI rushing to protect the rupee as well. In fact in September, it’s likely they sold a lot more; Here’s the Forex reserve situation:
It’s getting uglier.