India's central bank sold net $9.8 billion in March as Iran war battered Indian rupee, bulletin shows

MUMBAI: The Reserve Bank of India sold $9.76 billion in the foreign exchange market in March on a net basis, turning into a net seller of dollars after two months of purchases as the Iran war battered the South Asian currency.

The Indian rupee fell 4% in March to post its steepest monthly decline in over 6 years as a surge in energy prices following the start of the Iran left India staring at steep risks to its growth-inflation balance.

In the month to which the data pertains, the rupee had declined to its then record low of 95.21 per dollar, drawing stern regulatory measures to manage volatility.

During the month, the RBI purchased $19.88 billion and sold $29.64 billion. In February, it had net bought $7.4 billion.

The RBI’s net outstanding forward dollar sales stood at $103.06 billion as of end-March, compared with $77.7 billion at the end of the previous month.

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The Iran war has disrupted global energy markets, sparking a record pace of foreign portfolio outflows from Indian stocks and bonds as investors fret over the risks to India which imports most of its energy.

The currency has since extended its decline and hit a record low of 96.96 per dollar earlier this week on Wednesday. Dollar selling interventions by the central bank on Thursday and Friday, meanwhile, helped it recover and close at 95.69 on Friday.

India’s central bank intervenes in the spot and forward markets to curb exchange rate volatility.