Rupee's defence takes RBI dollar shorts to a record high

The Indian rupee has appreciated from its record low of 96.96 per dollar on May 20 to close at 94.66 on Tuesday, supported by multiple RBI interventions that prevented it from breaching the 97 mark. The central bank's dollar short positions have risen to a record high as it defends the currency. Market participants expect 40-70 billion dollars in capital inflows via the ECB and FCNR(B) schemes, which the RBI is likely to use to retire its net short forward book and rebuild reserves from the current 672 billion dollars toward its earlier peak of 728 billion dollars.