India’s Rupee: Groundhog Day?

Research evidence excerpt

India’s Rupee: Groundhog Day?

J P M O R G A N Asia Pacific Economic Research

23 July 2026

An ostensible objective of the slew of measures the RBI announced on June 5th to Emerging Markets Asia, Economic

attract capital inflows was to stabilize expectations in the Rupee market. By all and Policy Research

accounts, the RBI always had a sufficient buffer stock of FX reserves to cover gross Sajjid Z Chinoy

financing requirements. Instead, Dollar hedging behavior had spiked in April and (91-22) 6157-3386

May pushing the Rupee into a self-fulfilling spiral – wherein increased dollar sajjid.z.chinoy@jpmorgan.com

hedging resulted in a weaker rupee driving even more hedging -- as we had JPMorgan Chase Bank, N.A., Mumbai Branch

previously demonstrated. The June 5th measures were therefore meant to act as a Michael J Loh

circuit-breaker in the FX market. To be sure, they served their initial purpose with (65) 6882-1783

michael.loh@jpmorgan.com

the hedging spike observed in April and May fully reversing in June and helping JPMorgan Chase Bank, N.A., Singapore Branch

bring some calm to the Rupee market. Toshi Jain

(91-22) 6157-3387

Hedging pressures are re-emerging….. toshi.jain@jpmorgan.com

JPMorgan Chase Bank, N.A., Mumbai Branch

Disconcertingly, however, hedging pressures appear to have re-emerged in recent

days. Figure 1 below captures the year-on-year growth rates (to take care of

seasonality) of onshore dollar hedging (purchase of Dollar forwards net of sales of

Dollar forwards). What it reveals is that the (growth rate of) net purchases of Dollar

Forwards – which had come off sharply in the month of June – has again begun to

spike in recent days.

Figure 1: Onshore FX Forward Hedging

%oya, 7dma

450 RBI

Measures

-50

Jan 26 Feb 26 Mar 26 Apr 26 May 26 Jun 26 Jul 26

Source: CCIL