Rupee Falls Sharply, RBI Stops Dollar Purchases for First Time in 11 Years.

The Indian rupee has come under heavy pressure, forcing the Reserve Bank of India (RBI) to shift its strategy. In July, for the first time in 11 years, the RBI completely halted its dollar purchases in the spot market. Instead, it sold $2.54 billion to stabilize the rupee, marking its first such intervention since February 2014.As a result, India’s foreign exchange reserves fell from $699.73 billion on July 4 to $688.87 billion by August 1. Despite this, the rupee continued to weaken, registering a 3.65% decline so far in the current financial year.

In July alone, the rupee dropped 2.23%, its biggest monthly fall of 2025, surpassing earlier declines of 1.21% in May and 1.16% in January. On a calendar-year basis, the rupee has fallen 3.48% against the dollar, the sharpest two-year depreciation seen recently. Experts noted that this marks a strategic shift by the RBI. Instead of accumulating reserves through dollar purchases, the central bank prioritized currency stability and stepped in defensively by selling dollars to manage volatility .Global factors have worsened the rupee’s slide. Uncertainty in U.S. monetary policy, the prolonged Russia–Ukraine war, and rising tensions between Israel and Iran have added pressure. At the same time, foreign investors are withdrawing capital from Indian markets, further weakening the currency. Adding to the strain, on August 27, U.S. President Donald Trump imposed a 50% tariff on Indian goods, reducing dollar inflows and negatively impacting market sentiment.