Thread by @deepakshenoy

The RBI dividend is smaller than I thought, but it's good. The RBI is overcapitalized, it knows it, and I've pleaded for making accounting profits off the massive FX hoard for ages, and I'm super glad the RBI did some.

Forex markets are okay. 72.77 USDINR, near 2021 lows.

Also, there has been no REAL RBI selling. RBI bought, and then did a sell-buy swap. So the $580 billion is actually around $660 bn if you consider that they own $80bn forwards.

See how much the RBI bought this year - it's 50% more than any other year, if you include that whopping huge Forex forward exposure they own.

If in the process of that, they did some selling of spot to make their accounts more reflective of reality (i.e. there are real profits in the rupee fall since they started buying it): it's a good thing.

INR hurt against most other currencies in March and April, but has come back down since (this is about two weeks old data)

And through all that RBI buying the rupee actually appreciated (possibly because they swapped into the futures instead) But RBI net sold dollars in March and yet, the USDINR kept falling.

RBI buys dollars to control the dollar falling/rupee rising - but you can see how all the buying last year still saw the dollar fall.

The forex markets are fun, but the scale of printing in the west has disrupted most traditional market theory.

RBI needn't "print" anything to pay this dividend. There is no need to sell forex, or anything of that sort. Read our (now famous) article on it: capitalmind.in/2020/04/how-th…