India Sold $8 Billion of Treasuries as Central Bank Aided Rupee

Sales coincided with the RBI’s presence in the currency market.

Anirban Nag

08 Aug 2018, 05:30 AM IST

India Sold $8 Billion of Treasuries as Central Bank Aided Rupee

50 subject one dollar note sheets sit in a stack before receiving a serial number and the U.S. Treasury and U.S. Federal Reserve seals in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

(Bloomberg) -- India’s central bank sold $8 billion in U.S. Treasuries in April and May as part of its intervention strategy in the currency market to prop up the rupee.

The Reserve Bank of India’s holdings fell to $148.9 billion as of end-May from $157 billion in March, data from the department of the Treasury showed. That coincided with net sales of $8.25 billion of the greenback in the domestic spot market in the same period, according to RBI data.

Despite the RBI’s presence, the rupee lost 3.3 percent against the dollar in those months as foreign funds exited high-yielding emerging markets for safer havens amid rising U.S. interest rates. The local currency remains Asia’s worst performer this year.

Data from the Institute of International Finance showed India experienced a significant slowdown in capital flows. Its quarterly capital flows decreased to $6 billion in the second quarter of 2018 from $26.3 billion in the first quarter of 2018.

Read: India’s Reserves Head for $400 Billion as RBI Defends Rupee

That slowdown and the RBI’s intervention in the currency market has seen foreign exchange reserves drop to $404 billion, down from a record $426 billion in mid-April.

To contact the reporter on this story: Anirban Nag in Mumbai at anag8@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram, Pradeep Kurup