RBI intervenes to prevent rupee from breaching 96 amid 7% annual depreciation
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims·
Exchange rate volatility and monetary intervention: a key GS3 topic for macroeconomic stability.
Why in news
The RBI intervened in the forex market to prevent the Indian rupee from breaching the 96 level against the US dollar amid a 7% annual depreciation.
Background
The rupee fluctuated between 95.76 and 95.9850 before RBI intervention. Depreciation was driven by crude oil prices exceeding $100, US Treasury yields above 5.2%, and capital outflows.
Facts for Prelims
- FactRupee depreciation rate: 7% annually as of October 2026
- FactUS Treasury yields: Above 5.2% cited as a factor for rupee depreciation
- BodyRBI: The regulator responsible for intervening in forex markets to stabilize the rupee
Prelims practice question
Which factor was cited as a driver for the Indian rupee's depreciation in the note?
- (a)US Treasury yields above 7%
- (b)US Treasury yields at 4.5%
- (c)US Treasury yields below 3%
- (d)US Treasury yields above 5.2%
Show answer
Answer: (d) US Treasury yields above 5.2% — The note identifies US Treasury yields above 5.2% as a specific factor for rupee depreciation.
For Mains
Q. Analyze the factors influencing the volatility of the Indian Rupee and evaluate the efficacy of RBI's interventionist policies in maintaining exchange rate stability.
Dimensions to cover in your answer
- External shocks: Impact of high crude oil prices and US Treasury yields on domestic currency stability
- Capital flight: Challenges in managing capital outflows and their correlation with forex reserve depletion
- Monetary policy trade-offs: Balancing exchange rate stability against domestic inflation and interest rate parity
Keywords: Exchange Rate Volatility · Forex Reserves · Capital Outflows · Monetary Intervention · Macroeconomic Stability
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.