RBI to conduct 6-month dollar/rupee buy/sell swap auction for $5 bln on Fri
This story was originally published at 21:12 IST on 28 January 2025
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--RBI to hold $5 bln, 6-mo dlr/rupee buy/sell swap auction 1030-1130 IST Fri
MUMBAI – The Reserve Bank of India will conduct a $5 billion dollar/rupee swap auction on Friday, wherein it will buy dollars for immediate delivery and sell them for delivery after six months, the central bank said in a press release Tuesday. The swap will reverse on Aug. 4, the RBI said. This will be the first dollar/rupee buy/sell auction since April 2019.
The RBI's continued intervention in the foreign exchange market has strained the systemic liquidity as it sold dollars to prevent the Indian rupee from declining sharply. The RBI has been conducting dollar/rupee buy/sell swaps since December in the currency forwards market intermittently to offset the impact of its dollar sales in the spot market and avert pushing out rupee liquidity. The net liquidity injected by the RBI--a proxy for systemic liquidity deficit--has averaged nearly INR 2 trillion this month.
Participants must place their bids in terms of the premium they are willing to pay to the RBI in paisa terms up to two decimal places. The auction will be multiple-price based and will take place between 1030 IST and 1130 IST. The result of the auction will be announced on the same day.
The quantum of US dollar amount to be accepted will be decided by the RBI. The central bank will also reserve the right to accept bids for less than the aggregate amount, to accept marginally higher than the notified amount due to rounding-off, or to accept or reject any or all the bids, either wholly or partially, without assigning any reasons, the release said.
On Monday, the RBI announced that it would conduct dollar/rupee buy/sell swap for $5 billion for a period of six months to ease liquidity conditions. The RBI also announced several other measures to ease the tight liquidity conditions, with banking system liquidity in deficit for over a month. The central bank will buy government bonds worth INR 600 billion through open market operation auctions and conduct a 56-day variable rate repo auction on Feb. 7, for a notified amount of INR 500 billion. End
US$1 = INR 86.52
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Srijita Bose
Edited by Tanima Banerjee
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