Rupee falls 17 paise against US dollar as FCNR swap deadline weighs down sentiment

The Indian rupee experienced a decline of 17 paise to reach 95.59 against the US dollar as investor sentiment became more cautious following the Reserve Bank of India's decision to expedite the deadline for its concessional FCNR (B) deposit swap facility. The RBI had initially set the swap facility's cut-off date for FCNR (B) deposits until August 31, which was brought forward to August 31 following the decision.

The facility aimed to encourage foreign currency inflows. As of August 13, the concessional swap facility had attracted $56.84 billion.

The rupee opened at 95.50 at the interbank foreign exchange market on Monday but dropped to 95.59 by the end of the trading day. It had closed at 95.42 on Friday, up by 3 paise. Amit Pabari, MD of CR Forex Advisors, stated that the inflows facilitated by the facility provided substantial support to the rupee, but the market would eventually focus on a more permanent solution. The support from these inflows remains significant, but the market will gradually shift its focus beyond this temporary cushion.

Pabari predicted that the 95.20-95.30 zone could act as a crucial support level, allowing USD/INR to move towards the 96.20-96.50 range in the days ahead. The FCNR (B) scheme offers banks competitive interest rates to attract foreign currency deposits. Meanwhile, the dollar index stood at 99.54, falling by 0.12 percent, while Brent crude oil prices increased by 0.47 percent to $88.94 per barrel.

Indian equities also opened lower, with the Sensex declining by 284.85 points to 77,717.05 and the Nifty falling by 69.25 points to 24,297.05. Foreign institutional investors remained net buyers of Indian equities on Friday, investing Rs 508.12 crore. India's foreign exchange reserves saw a sharp increase in the latest reporting week, rising by $14.136 billion to $707.002 billion.