The central bank, as per the Reserve Bank of India's (RBI) monthly bulletin, sold $3.66 billion in the spot foreign exchange market in June.
The bulletin elaborated that the RBI had bought $1.16 billion and sold $4.83 billion in June. The bank had bought $1.76 billion in May compared to this.
In June, the rupee weakened amid uncertainty over US tariffs and foreign fund outflows from India. To check a sharp depreciation of the rupee, the RBI chose to offload dollars in the market.
Meanwhile, India's external sector showed resilience with only a modest current account deficit and foreign exchange reserves sufficient to pay for almost 11 months of imports.
The stability of India's external sector has been a major cause behind its stable macroeconomic conditions in the midst of a globally traded environment influenced by tariff realignments and heightened uncertainty," the Finance Ministry emphasized in its 'Monthly Economic Review'.
The rupee was in July one of the least volatile major emerging market and developing economies (EMDE) currencies, even as it depreciated slightly, the bulletin said. With S&P's upgrading of the Indian sovereign rating, the currency did gain against the US dollar during August, it added.
On the domestic economy front, the RBI said industrial activity remained subdued during July, while both manufacturing and services sectors continued to grow, retaining growth momentum.
Headline inflation fell for the ninth consecutive month in July, while financial conditions were supportive of domestic economic activity. "India's sovereign rating upgrade by S&P augurs well for capital inflows and sovereign yields in the future," the report added.
Apart from that, India's Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) also increased by $41 million, while the reserve position of the country with the IMF was up by $15 million to $4.754 billion. The above signals reflect India's improving financial cushion and ability to absorb external shocks.
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