RBI's $10-Billion Forex Swap Receives Strong Bids Amid Liquidity Deficit
The Reserve Bank of India's $10 billion three-year forex swap auction held on Friday witnessed strong bids from domestic institutions.
The central bank received bids worth $16.23 billion from 244 sources for its dollar-rupee buy-sell swap auctions. Of these, 161 were accepted for $10.06 billion. The cut-off premium as a result was Rs 6.551, according to a statement.
The weighted average premium of accepted bids was Rs 6.7329.
On Friday, the Indian rupee closed sharply lower against the greenback, as demand for the safe-haven unit persisted in the wake of tariff outlook uncertainty. The rupee closed 32 paise weaker at 87.52 against US Dollar.
The RBI had notified the auction last week, as it sought to further add durable liquidity in the banking system. Market participants had anticipated that the measure would bring in a liquidity infusion of around Rs 87,000 crore in the banking system.
In January, the central bank injected $5 billion via a six-month forex swap.
A currency swap involves the RBI buying dollars from banks using rupees, with an agreement to sell those dollars back at a later date. This dollar purchase by the central bank increases the supply of rupees, or rupee liquidity, in the market.
Three-year durable liquidity will provide vision to market participants and is being considered as a positive move for shorter-duration bonds and could lead to mild steepening in the yield curve.
Long-term dollar-rupee buy/sell swaps could also reduce the chances of open market operations for the next two weeks at least, which could impact the long-term bonds and contribute to a mild steepening in the yield curve, market participants said.
This move has come as the central bank has been trying to infuse durable and transient liquidity in the banking system by market intervention tools, such as conducting open market bond purchases, longer-term and short-term variable rate repo auctions and dollar-rupee buy/sell swaps.
As of Feb. 20, before the auction was announced, liquidity in the banking system was in deficit of Rs 1.87 lakh crore.
-
Signature Play: The Classic Cocktail Is Dead. Or Is It?
Classic cocktails are disappearing from India's cocktail menus. But they're still being ordered, taught to bartenders and borrowed from. So, who's really having the last drink?
-
A New Samvat Wishlist: Inclusive Prosperity And Human Development
India has strengthened its economic foundations through infrastructure, digital access and enterprise. Its next growth chapter must deepen productivity, create better livelihoods and widen participation in prosperity.
-
Love, Sex Aur Dhokha: The Audacious Plot To Spy On Jensen Huang
A Taipei dinner, a Singapore chip buyer and a suspected Chinese asset: inside the alleged spy operation that got close to NVIDIA's Jensen Huang.
-
Ten Things I Learnt This Samvat
Patience can be a trap. Cheap stocks can stay cheap. Leverage can wipe you out. What did Samvat 2082 teach us? Niraj Shah writes on 10 lessons from the year gone by.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
