RBI plans to stabilize rupee after drop to five-month low

The Reserve Bank of India aims to stabilize the rupee after the currency hit a five-month low. The rupee dropped due to money moving out of the country, even though the central bank raised the policy rate for the first time since February 2023. Experts say a stronger dollar index also puts pressure on the rupee. The central bank used dollar-rupee swaps to manage market money flow.

Context

Central banks use tools like policy rates and currency swaps to control money supply and protect local currency value. When foreign investors pull money out, local currency demand drops and prices fall. These steps help keep the financial system stable.