Rupee Volatility and Management — Current Affairs 2026
Current Affairs Connections
RBI intervenes heavily as rupee hits record lows amid global uncertainty
October 2022The rupee's depreciation to historic lows near ₹83 per dollar in October 2022 triggered massive RBI intervention, with the central bank selling over $100 billion in reserves during 2022-23. This episode highlighted the challenges of managing currency volatility in an interconnected global economy, where Federal Reserve tightening and geopolitical tensions create multiple pressure points simultaneously. RBI's response demonstrated the evolution of its intervention strategy, using a combination of spot sales, forward market operations, and communication policy to manage market expectations while preserving long-term competitiveness.
UPSC Angle: Questions likely to focus on policy trade-offs between exchange rate stability and reserve adequacy, effectiveness of intervention during global stress, and coordination between monetary and exchange rate policies
New regulations on currency derivatives trading to enhance market depth
March 2024RBI's introduction of additional currency derivative instruments and relaxation of participation norms represents a strategic shift toward building market-based mechanisms for volatility management. The new regulations allow more participants in currency futures markets and introduce longer-tenor instruments, aiming to develop natural hedging mechanisms that reduce reliance on direct intervention. This approach aligns with global best practices of building resilient forex markets that can absorb shocks without destabilizing the broader financial system.
UPSC Angle: Expected questions on market development vs. stability trade-offs, role of derivatives in risk management, and evolution of India's approach from control-based to market-based exchange rate management