India’s foreign exchange reserves fell to $723.61 billion for the week ending 16 February. This was down from $725.73 billion the previous week.
The change means reserves dropped by $2.12 billion over the period. The figures are reported in US dollars.
We’ve noted the small dip in India’s foreign exchange reserves to $723.61 billion. This indicates the central bank is likely selling dollars to prevent the Rupee from weakening past key levels. This action suggests a defense of the Rupee, particularly as it has been testing the 84.00 level against the US dollar in recent weeks.
For derivative traders, this signals an opportunity to sell short-term US dollar call options against the Rupee. If the central bank is capping the upside, then selling calls with strike prices like 84.25 or 84.50 for March expiry could be a viable strategy to earn premium. This is a bet that the central bank’s intervention will keep the currency pair from rising significantly in the near term.
This strategy is supported by recent domestic data, with January 2026 inflation holding at 5.2%, giving the central bank reason to prefer a stable currency to avoid importing price pressures. The Reserve Bank of India’s commitment to managing volatility is well-documented. We saw a similar playbook throughout 2024 and 2025, where reserves were used to keep the Rupee in a tight band despite global market fluctuations.
This consistent intervention has suppressed currency volatility, with one-month implied volatility for USD/INR options falling to near 2.8% recently, a significant low. This environment makes strategies that profit from a range-bound currency pair more attractive than those betting on a major breakout. Therefore, we should view this dip in reserves not as a sign of weakness, but as a confirmation of the central bank’s active presence in the market.
