The rupee’s slide towards 100 to the dollar is raising concerns over the economy, even as the RBI steps up efforts to arrest its fall. But intervention comes at a cost.

On November 2, the Rupee closed at 94.86 to the dollar, within the band it has occupied for five months. Crude prices had eased on hopes that a draft proposal from Qatar could pause the US-Iran war. Foreign investors offered a rare reprieve, buying a net Rs 3,600 crore of Indian shares on October 30 after nearly two years of selling. However, the calm has come at a cost. The Reserve Bank of India’s (RBI) forward book—the outstanding net amount of dollars it has committed to sell at future dates—reached a record $239.2 billion at September-end. Reserves fell for a seventh consecutive week to $719.75 billion on October 23, around $66 billion below their September 4 peak.

RBI governor Sanjay Malhotra says the central bank does not target any specific exchange rate level and steps in only to smooth excessive swings. Since May, however, it has sold dollars, mobilised overseas deposits, raised interest rates and tightened currency market rules to prevent further slide.

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