RBI Shifts Stance! 💰📉

For the past two years, the Reserve Bank of India (RBI) has been actively stabilizing the rupee (INR) by intervening in the forex markets called the "Intervention Strategy" 💱 — selling dollars and buying rupees to artificially prop up demand for our currency.

However, since October 2024, Foreign Institutional Investors (FIIs) have aggressively sold over $15 billion worth of Indian equities, leading to a liquidity crunch in our system. This forced RBI to shift the stance to "Reduced Intervention", leading the rupee to depreciate by over 4% in just four months, breaching the ₹87/USD mark today!!!! 😥 

🔹 The primary driver? A strengthening U.S. dollar amid a raging global tariff war (US - Mexico, Canada, China), which has reduced demand for foreign currencies.

🔹 India, recognizing the risks, is aligning its average custom tariff to 10.66% (from 11.65%) in the 2025 Budget, matching ASEAN avg. to potentially avoid trade retaliations. (but we NEVER KNOW!)

Now, before RBI cuts interest rates to stimulate growth, its immediate priority might shift to ensure adequate liquidity in the system and stabilize the rupee, ensuring a balanced macroeconomic environment.

Markets will be closely watching this week's monetary policy—will RBI go for an early rate cut, or will liquidity management take center stage?

#RBI

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