Rupee gains further after hitting 7-month high; will RBI’s rupee-dollar swap check rally?

By: |
March 15, 2019 4:39 PM

With the surge in foreign fund inflows, Indian currency Rupee extended rally on Friday after it reached its seven month high against the US Dollar on Thursday. According to Bloomberg index Rupee was trading at Rs 69.15 against the US Dollar after it opened at Rs 69.33 on Friday.  It rose by 20 paise against the US Dollar and closed at Rs 69.34 on Thursday.

Indian Rupee on 7-month high against the US dollar at 69.15. RBI to infuse long-term liquidity of $5 bln via dollar rupee swap arrangement on Mar 26 to contain the rally

With the surge in foreign fund inflows, Indian currency Rupee extended rally on Friday after it reached its seven month high against the US Dollar on Thursday. According to Bloomberg index Rupee was trading at Rs 69.15 against the US Dollar after it opened at Rs 69.33 on Friday.  It rose by 20 paise against the US Dollar and closed at Rs 69.34 on Thursday.

The Reserve Bank of India said Thursday it would infuse $5 billion dollar through long-term foreign exchange Buy/Sell swap auction in terms of its extant liquidity management framework on March 26 for a tenor of three years. FII’s poured in a net amount of Rs 1,482.99 crore on Thursday.

Speaking about the development, Murthy Nagarajan, Head-Fixed Income, Tata Mutual Fund told Financial Express Online that RBI has taken the above measure to control the currency appreciation. Dollar inflows has increased as global economy is showing signs of slowdown and perception of a stable government at the centre.

According to the new arrangement of India’s apex bank, banks can offer to swap dollars for rupees with the RBI at a premium decided by the auction process, which will potentially lower the hedging cost for the lenders, Reuters report said quoting traders on Thursday.

“If you look at capital flows, between equity and debt, we have already seen 2.8 billion dollar this month. So, we are seeing much stronger inflow as a result of which there has been a pressure on rupee to appreciate. However, RBI has been buying in the market to contain the extant of runaway appreciation,” Shubda Rao, Chief Economist with Yes Bank told Financial Express Online.

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