India's dollar buyer likely to step back as capital inflows drop

Still, dipping into RBI's reserves to sell dollars will be easier said than done

Traders counting on the Reserve Bank of India (RBI) to keep buying dollars may have to think again.

The central bank bought $36 billion of foreign exchange in the 12 months to January, seeking to stem the rupee’s appreciation. That’s likely to change given India’s widening current-account deficit and slowing capital inflows, with Rabobank saying the RBI may instead look to use some of its $420 billion of reserves to plug the dollar spending gap.

India is losing some of its red-hot appeal to foreign investors as a bank scandal, a widening fiscal deficit and the prospects of