Indian rupee falls past 95/USD as oil climbs, RBI taps swaps to drain excess cash
MUMBAI: The Indian rupee fell past the key 95-per-dollar mark on Wednesday, as escalating conflict in the Middle East put oil prices back on the boil, prompting likely central bank intervention to limit the South Asian currency’s losses. In addition to spot dollar sales, the central bank also likely conducted FX swaps maturing in September and October to drain excess rupee liquidity from the…
The Indian rupee dropped to below 95 US dollars on Wednesday, as tensions in the Middle East drove up oil prices. Central bank officials may have intervened in foreign exchange markets to curb the rupee's decline. In addition to selling dollars on the spot market, the central bank likely engaged in foreign exchange swaps set to mature in September and October.
These actions helped the rupee close at 95.1050, preventing steeper losses despite Brent oil prices surpassing $100 per barrel due to fears of conflict in the Middle East. Iran's Revolutionary Guards announced attacks on U.S. vessels and oil tankers in the Gulf, retaliating for a U.S. attack on Iranian oil tankers the previous day.
The conflict's impact was felt in Indian stock markets, which fell by around 0.9%, mirroring declines in regional equities. European shares also suffered while futures indicated a lackluster start for Wall Street. Forward premiums for the dollar-rupee surged, suggesting central bank interventions in the form of sell/buy swaps for near-term maturities to eliminate excess rupee liquidity from the banking system.
ANZ suggested a combination of a phased incremental cash reserve ratio increase, moderate sell-buy FX swaps, and limited short-term bond sales to manage the liquidity situation. The 1-year dollar-rupee forward yield rose 11 basis points, reaching a three-month peak of 3.16%.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
