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Foreign exchange interventions, both spot and forward, effectively counter capital flows volatility, with symmetric effects of purchases and sales, a study published in the Reserve Bank's latest Bulletin said. This study investigates the effectiveness of forex interventions undertaken by the Reserve Bank of India (RBI) and finds that the volatility of portfolio flows, induced by global spillovers, is the main source of exchange rate volatility in India. The study titled 'Foreign Exchange Intervention: Efficacy and Trade-offs in the Indian Experience', investigates the effectiveness of forex interventions undertaken by the Reserve Bank of India (RBI). RBI further stated that in the second half of 2024, judicious interventions have ensured that the Indian Rupee (INR) has experienced less volatility than other major currencies, despite the unrelenting pressure from a surging US dollar and sustained outward flights of FPIs. The US VIX has a positive and statistically significant impact on exchange rate volatility, indicating that heightened global uncertainty accentuates exchange rate volatility in India, the central bank noted. Powered by Capital Market - Live News
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