The Indian rupee logo is seen inside the Reserve Bank of India.
Credit: Reuters Photo
Mumbai: The Indian central bank was likely conducting dollar-rupee buy/sell swaps in the mid-to-far tenors on Thursday to prevent its spot markets intervention from impacting rupee liquidity and headline foreign exchange reserves, four traders told Reuters.
The rupee declined to its all-time low of 84.88 earlier in the session, prompting likely dollar-selling intervention by the Reserve Bank of India, which helped limit the currency's losses.
The central bank was likely conducting the dollar-rupee buy/sell swaps in spot over March, May and November, a trader at a private bank said.
Over recent trading sessions, the central bank has complemented its intervention in the spot market with dollar-rupee buy/sell swaps, likely intended to limit the impact of spot dollar sales on headline foreign exchange reserves and INR liquidity, traders said.
Under a buy/sell swap, the RBI undertakes to take delivery of dollars at the spot rate, which will be reversed at a future date.
Dollar-rupee forward premiums pulled back on account of the central bank's buy/sell swaps, with the 1-year implied yield retreating 5 basis points from the day's peak to 2.19%.