The Reserve Bank of India’s (RBI’s) short dollar forward positions rose by $6 billion in September — the first increase in seven months — indicating the central bank’s readiness to defend the rupee in the forward market amid pressure on the currency, latest data showed.
The net short dollar position stood at $59.4 billion at the end of September, up from $53.4 billion in August.
Market participants said the amount likely increased further in October as pressure on the rupee persisted.
The dollar deficit in the RBI’s forward book had peaked at $88.8 billion in February 2025, after which the central bank began cutting it down, reaching $53.4 billion by August.
In October, the RBI was seen steadily supplying dollars to prevent the rupee from slipping beyond 88.8.
After recognising the scale of long speculative positions in the market, the central bank decided to intervene more aggressively, driving down the spot rate.
A large part of this intervention is believed to have taken place in the non-deliverable forward (NDF) market.
Estimates now suggest the RBI’s short forward book may have exceeded $70 billion.
“In October, it was earlier supplying dollars steadily to prevent the rupee from weakening beyond 88.8.
After realising the extent of the long buildup, it then decided to intervene aggressively and hammered down the spot.
A large part of the intervention was most likely done in the NDF.
Our guesstimate is that the RBI’s short forward book may well be over $70 billion now,” said Abhishek Goenka, founder and chief executive officer, IFA Global.
Market participants said the RBI likely expected that by pushing down the spot rate, long speculative positions would unwind, allowing the rupee to stabilise in a lower range and enabling a gradual reduction in its forward shorts.
However, given the RBI’s large short exposure, traders anticipate that if the central bank does not roll over these positions, upward pressure on NDF points will be inevitable — a pressure that could spill over into the onshore spot market as well.
Following the festival season, the rupee has swiftly returned to record lows.
The pace of depreciation has limited the RBI’s ability to square off its short positions at lower levels.
On Monday, the rupee weakened to near a record low of 88.81 per dollar intraday amid strong greenback demand and oil-related buying.
The RBI likely intervened through state-run banks around 88.8 to contain losses and stabilise the market.
The local currency closed unchanged at 88.78 per dollar.
RBI now faces a dilemma: whether to continue defending the 88.8–89 range at the cost of expanding its forward shorts, or allow the rupee to adjust.
“The RBI likely thought pushing down the spot rate would cool speculation and stabilise the rupee, but the market knows it’s short in forwards.
"If it doesn’t roll those over, pressure will rise again.
"After the quick post-festival drop, the RBI faces a choice — defend 88.8–89 or let the rupee weaken, which it may eventually have to do,” observed a market participant.
Analysts expect the RBI may eventually allow the rupee to weaken, possibly during a period of broad dollar strength, particularly against emerging market currencies.
Such timing would help preserve reserves for future volatility.
The RBI has maintained that it does not target any specific exchange rate and intervenes only to curb undue volatility.
India’s foreign exchange reserves, at $695 billion, continue to provide a strong buffer against pressure on the rupee.
