The Indian rupee hits a historic low, highlighting the limitations of the central bank's intervention support in the face of the impact of the oil price shock.

The Indian rupee recently fell to a historic low, highlighting how high oil prices are constantly offsetting India's efforts to stabilize its external balance. The deteriorating trade situation, continuous outflow of foreign capital, and increasing international balance of payments pressures have kept the rupee locked in a continuous depreciation trend, exposing India's external vulnerability. The Reserve Bank of India has implemented a number of measures to curb speculation in the foreign exchange market, leading to a temporary strengthening of the rupee, but the gains have now been reversed. In recent months, the RBI has increased its dollar sales, tightened domestic market liquidity, and strengthened offshore market regulation. These measures initially triggered short-covering and compressed forward premiums, temporarily stabilizing the rupee exchange rate. However, such interventions can only smooth out exchange rate fluctuations and cannot reverse the overall depreciation trend. Despite India's seemingly sufficient foreign exchange reserves, the overall reserves have declined since the end of March, reflecting the rising costs of the central bank's significant interventions in the spot market.