In the past year, the dollar has climbed against all major monetary units, and the rupee has not been an exception to that movement.

The Indian currency, rather, has been an outlier among its emerging market peers, sliding the most in Asia against the world’s reserve currency. The precipitate plunge in the rupee appears to have brought about a pronounced shift in Mint Street’s strategy on managing forex reserves.

Instead of dollar-denominated US bonds, gold appears to be the latest favourite with the Reserve Bank of India (RBI) as yields began hardening along the Atlantic seaboard this summer.

The RBI sold US treasury bonds worth $17 billion between March and August. Simultaneously, it enhanced its gold holding and bought 6.3 lakh troy ounces (19.6 tonnes) of the metal in this period.

The rising dollar has caused gold prices to fall as they are inversely related. But it has also turned out to be a diversification opportunity for central banks whose currencies are volatile.

Central banks across the globe, including the RBI, have together added a net of 193.3 tonnes to their stock of gold reserves in the first six months of 2018, up 8% from the same period a year ago, according to a recent report by the World Gold Council.

The IMF, in its 2018 Global Financial Stability Report, has highlighted the relevance of gold in a country’s foreign exchange reserves, both for the long term and the near term, from the strategic and tactical perspectives.