MUMBAI: India’s central bank is likely conducting buy/sell dollar-rupee swaps in addition to selling spot dollars to support the rupee, three traders told Reuters on Thursday.
The Reserve Bank of India’s (RBI) buy/sell swaps are largely for spot over February and January, the traders said.
The RBI has been routinely conducting such swaps to manage the impact of its spot market interventions on rupee liquidity in the banking system. The central bank was likely selling dollars to support the rupee on Thursday as well, traders said.
Spot dollar sales by the central bank suck out rupee liquidity but that can be offset using buy/sell USD/INR swaps.
The dollar-rupee February forward premium fell over 2 paisa to 11 paisa, while the January forward premium was also lower at 185.50 paisa.
The central bank had also conducted a six-month $5 billion buy/sell dollar-rupee swap last week, which was oversubscribed by about 5 times.
