Rupee slump to 95.1/$ as oil climbs past $100, RBI taps swaps to drain excess cash
In addition to spot dollar sales, RBI also likely conducted FX swaps maturing in September and October to drain excess rupee liquidity from the banking system.
The Indian rupee slipped below the 95-dollar threshold on Wednesday, as rising tensions in the Middle East pushed oil prices above $100 per barrel. This prompted the Reserve Bank of India (RBI) to intervene, likely through foreign exchange (FX) swaps maturing in September and October, to reduce excess liquidity in the banking system.
The interventions helped the rupee close at 95.1050 against the US dollar, preventing further depreciation despite Brent oil prices soaring past $100. Escalating conflict in the Middle East prompted Iran’s Revolutionary Guards to attack U.S. vessels and oil tankers in the Gulf, causing regional share markets to decline and prompting a muted start for Wall Street equities.
The dollar-rupee forward premiums surged, indicating potential central bank interventions to manage liquidity. ANZ analysts suggested a phased increase in the incremental cash reserve ratio, moderate sell-buy FX swaps, and short-term bond sales to handle the liquidity issue, which could support the rupee by improving hedging incentives for exporters.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
