RBI sold dollars in October

The Reserve Bank of India intervened in the foreign exchange market for the second month in a row, selling $943 million (Rs 4,714 crore) in October, according to the RBI's 'Current Statistics’ data.

The bank sold $845 million in September. In both these months, the central bank did not buy any dollars.

Contrary to belief that the RBI has been keeping its hands off the foreign currency market, it appears to have intervened to ward off extreme volatility. The rupee had touched a low of Rs 50.32, intra-day, on October 21. The rupee has fallen 19 per cent against the dollar so far in 2011.

The average price (based on the rupee equivalent of the contract rate given by the RBI) at which the central bank sold dollars in September was at Rs 48.99/dollar and, in October, it was Rs 49.98 a dollar.

Net sellers after 2009

The sale of dollars by the RBI in September and October comes after a nine-month hiatus. The bank last sold dollars in November 2010. It, however, bought more dollars than it sold that month. The RBI had, in the whole of FY-11, intervened in the currency market only during four months and was a net buyer in all those months.

The last time the RBI sold more than it bought was in 2009 – April, May, July and November – when the economy was struggling to recover from the global crisis. The rupee had touched a low of Rs 52.02 on March 9, 2009.