India’s foreign exchange reserves fell to $688.06 billion in the week ending 23 March. This was down from $698.35 billion in the previous period.
The figures indicate a decrease of $10.29 billion between the two reporting dates. The data refers to reserves held in US dollars.
Central Bank Dollar Selling And Rupee Pressure
We’ve seen India’s foreign exchange reserves fall by over $10 billion to $688.06 billion. This is a strong signal that the central bank is selling dollars to defend the Indian Rupee. The intervention suggests there is significant pressure pushing the currency weaker.
This pressure is coming from outside, as the U.S. Dollar Index has climbed to over 107, fueled by a firm stance from the American central bank. Globally, money is flowing back into dollar-denominated assets, making it harder for emerging market currencies. We’re also seeing foreign portfolio investors turn into net sellers, pulling around $4.8 billion out of Indian markets in the first quarter of 2026.
Looking back at 2025, we saw a similar situation when the Rupee weakened due to high oil prices. The central bank intervened then too, but the weekly drop in reserves was rarely this large. The current, more aggressive selling suggests the underlying pressure is much greater than what we faced last year.
Given the central bank’s action, we should expect continued high volatility in the USD/INR currency pair. Traders should consider buying options to profit from these expected large price swings. Hedging against further Rupee depreciation using forward contracts also looks like a sensible strategy in this environment.
