Rupee slips as sentiment drags on RBI curtailing FX inflow window

The Indian rupee slipped on Monday after the central bank unexpectedly shortened the deadline for its discounted forex swap facility for non-resident deposits, several traders said.

Persistent importer dollar demand further weighed on the rupee, while likely intervention limited losses, extending a pattern seen last week.

The ‌rupee was ⁠at 95.60 ⁠per dollar, its weakest level in two weeks, and down 0.2% on the ​day.


The Reserve Bank of India said late on Friday it is bringing forward by ​a month the cutoff for its discounted forex swap facility, following more than $50 billion in inflows from non-resident Indian deposits.

"There are some jitters ​since the central bank in the first week ⁠of August ‌had said there is no proposal to ​curtail the scheme, ​but has since done the same," a trader ⁠at a private bank said.

Dollar-rupee forward premiums jumped on Monday ​with the 1-year implied yield up 8 basis points ​at 2.79%, snapping a three-session streak of declines which had pushed it to an over one-month low.

"We expect our earlier estimate of inflows from the forex swap that stood at $60 billion-$70 billion has some clear upside. We revise this up to $80 billion - given the stronger the ‌expected flows, but will be below what could have been in terms of the curtailed window," analysts at ​BoFA Global ​Research said in a ⁠note.

Elsewhere, Asian currencies were mostly stronger while Brent crude oil futures were a tad lower at $88.3 per barrel with investors monitoring fading expectations of a U.S.-Iran peace breakthrough and slower tanker traffic through the Strait of Hormuz, a key global energy artery.

Regional stocks though were shored up by trimmed wagers on rate hikes by the U.S. Federal Reserve which also pulled down the dollar index 0.1% to 99.4.