A softer option not easy.

"Indian rupee on November 4 appreciated most in over two weeks on likely intervention by the Reserve Bank of India (RBI) in the offshore non-deliverable forward (NDF), market participants said." "The local currency has remained towards 88.70 in the last few weeks amid pressure from Asian currencies." MC. After hitting a high of 88.866 on 09 October, the rupee is trading at 88.587 against the US dollar this morning. Investing. com. "NDF contracts specify the currency pair, notional amount, fixing date, settlement date and NDF rate." "The fixing rate is when you calculate the difference between the spot market rate and the agreed rate." Investopedia. This is unlike when the RBI sells dollars in the open market to prevent the rupee from falling further, in that, selling dollars reduces the RBI's foreign exchange reserves and is visible. India's foreign exchange reserves fell by $6.93 billion to $695.35 billion during the week ending 24 October, the foreign currency reserves declining by $3.86 billion to $566.55 billion, while a fall in the price of gold accounted for the rest. TOI. NDF transactions, on the other hand, are carried out offshore out of sight and no actual currency is exchanged at the time of the contract. Only the difference in open market exchange rates of the currency pair is probably settled at the end of the contractual period. NDF may be a fancy term, used by central banks for, what is known as, 'hedging' between companies (wikipedia). "Over the past year since President Donald Trump's return to the White House, the rupee has declined by 5% as investors grapple with stark shifts in US trade and immigration policies. More recently, a more hawkish turn in the Federal Reserve's policy outlook and dollar demand, spurred by the maturity of positions in the non-deliverable forward market, have become a sore spot for the local currency." Reuters. NDFs have to be settled in cash on maturity and affect the rupee. "Goldman Sachs in a note released last month, said that much of the external headwinds was likely already reflected in the exchange rate. The rupee now looks undervalued both against the dollar and on a trade-weighted basis," as "the Indian rupee is the weakest among emerging Asia currencies so far." The real effective exchange rate (REER) of the rupee against a basket of 40 Asian currencies is at 98.79, which means it is 1.21% weaker than parity. Reuters. In the October meeting of the Monetary Policy Committee, the RBI kept its interest rate unchanged at 5.5%. "In November 2024, India's REER reached a record high of 108.14." This made our exports 8% pricier than our peers and was because of inflation and high capital inflows. The Print. The fall in REER may be a reason why "India's export diversification strategy is showing early success following a 50% US tariffs." As,"Sectors like cotton garments, marine products, and tea are finding new markets in Asia, Europe and the Middle East." TOI. The government is importing Russian oil at heavy discounts but has kept the retail price of petrol same as before  (goodreturns.in) and is raking in windfall gains by raising taxes. That is why Trump has levied 50% taxes on Indian goods and restrictions on H-1B visas. The Indian government does not want to be seen to lose this contest so the pressure is on the RBI to do something. The RBI can only play with the rupee. What if it loses control? A case of rock and hard place? Not easy to choose the softer.