Forex reserves shrink faster than under 2008 global crisis, taper tantrum

BoP deficit, longer US tightening cycle may lead to slower pace of RBI intervention

Over the past eight months, global financial markets have been dealt the double whammy of the war in Ukraine and the fastest pace of US monetary policy tightening in almost two decades.

Amid these headwinds, the Reserve Bank of India has shielded the rupee from runaway depreciation by drawing down upon its foreign exchange reserves at a much faster pace than the last two phases of major external volatility that have occurred over the last 15 years.

The two phases in question are the global financial crisis of 2007-08 and the ‘taper tantrum’ of 2013, during which the rupee suffered