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Informist, Thursday, Sept. 3, 2026

By Divya Moolayattil

MUMBAI – The rupee is expected to open sharply higher as the inflows through the Reserve Bank of India's concessional swap facility reached a staggering $136.4 billion by Aug. 31, with banks mobilising around $127.2 billion in foreign currency non-resident (bank) deposits, far exceeding market expectations of $90-100 billion. 

The FCNR (B) mobilisation picked up sharply, rising by $61 billion, in the final week before the deadline. The rupee strengthened nearly to 94.33 in the offshore after spot trading hours Wednesday, reaching the highest level since Jun. 19. Dealers said the RBI likely intervened in the offshore market at 94.90 per dollar. 

"The FCNR (B) number is impressive. The RBI now has huge muscle due to these inflows," a dealer at a private sector bank said. "At present, the system has a huge INR surplus due to long-term rupee liquidity provided by the RBI via swaps. The RBI might suck out additional liquidity in the near term. This will put depreciation pressure, so at present the RBI is hitting hard to take it to their comfort level and consolidate while they buy back slowly either via sell/buy swap it through market operations." 

The rupee is likely to open at 94.35-94.40 per dollar. The Indian unit may move in the range of 94.15-94.75 against the dollar Thursday after settling at 94.9700 Wednesday. Dealers said the rupee could appreciate further as exporters may look to sell the dollar now. "Exporters' panic would determine market movement today," a dealer at another private sector bank said. 

However, banks may also buy dollars on behalf of companies, noting a relatively lower dollar-rupee level, which will put pressure on the Indian unit during the day.  

Surplus liquidity in the banking system surged to INR 7.76 trillion on Tuesday from INR 6.65 trillion a day earlier, as strong inflows mobilised through the RBI's FCNR (B) swap scheme added to the system's liquidity. "Mopping up the surplus banking liquidity is a challenge. The RBI may have to employ a panoply of liquidity absorption tools. The options include continuing Variable Rate Reverse Repo operations, an incremental Cash Reserve Ratio hike for 2-3 months, and sell-buy swaps," Nomura said in its report. 

The dollar inflows are expected to boost the balance of payments surplus to around $66 billion in FY27 from a deficit of $23.6 billion in FY26, Nomura said. 

The Japanese yen traded around 158.8 per dollar on Thursday after rallying sharply overnight on speculation that authorities had conducted a rate check, in which officials would contact banks to check exchange rates and signal the possibility of intervention. The yen jumped as much as 1.2% to 158.21 in New York trading on Wednesday. 

The dollar index eased modestly on softer-than-expected US ADP employment data, which will also support the Indian unit. US private payrolls increased by 38,000 in August, the weakest pace since February and below market expectations of 46,000.

However, the escalation in the West Asia war and the consequent rise in crude oil prices could eventually put pressure on the Indian unit. At 0800 IST, Brent crude oil for November delivery was at $95.70 per barrel, up from $95.63 Wednesday.

FORWARDS

Dollar-rupee forward premiums may inch down as banks may use the Reserve Bank of India's swap window to offload surplus dollar liquidity stemming from robust foreign currency non-resident (banks) deposit inflows, dealers said. However, the fall may be limited as banks may buy dollars for forward delivery on behalf of importers, dealers said. 

On an annualised basis, the premium on the one-year exact-period dollar-rupee forward contract is seen at 2.95-2.99% Thursday. Wednesday, it settled at 2.99%. On an absolute basis, the premium ended at 286.03 paise.

End

US$1 = INR 94.9700

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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