RBI Battles Volatility as Indian Rupee Faces Geopolitical Headwinds

The Indian Rupee has experienced unprecedented volatility since Sanjay Malhotra assumed leadership of the Reserve Bank of India (RBI) in December 2024. Shifting away from the tight volatility controls of his predecessor, the currency has seen significant swings, eventually establishing multiple record lows. The depreciation was fueled by a combination of geopolitical shocks and trade tensions. Escalating rhetoric from the U.S. regarding tariffs and penalties over Russian oil purchases pushed the rupee past the 88 and 90 per dollar marks. Regional instability, including military strikes between India and Pakistan, further accelerated the slide. The currency's descent toward the 100-per-dollar threshold triggered a series of aggressive interventions by the RBI in March and April. These measures included strict curbs on currency position limits to deter speculators after the rupee weakened past 94, marking some of the boldest regulatory steps in over a decade. While the RBI has begun rolling back some of these emergency measures, the central bank's willingness to act has created a psychological floor for the currency. Analysts suggest that the threat of further incremental interventions is currently keeping aggressive bears at bay, though the rupee remains highly sensitive to energy price spikes caused by disruptions in the Strait of Hormuz.