RBI's dollar-rupee swap auction subscribed nearly twice over
What's the story
The Reserve Bank of India (RBI) has witnessed a massive response to its three-year dollar/rupee buy-sell swap. The auction drew bids of nearly $10 billion, nearly double the amount on offer. This comes as the central bank continues to protect a rapidly depreciating rupee by selling dollars from its foreign exchange reserves.
Auction details
Bids worth $9.8 billion received
The RBI accepted 141 bids at the FX swap auction, with a premium cut-off set at ₹9.10. A total of 254 bids worth $9.8 billion were received in the process. The move comes as part of the central bank's efforts to stabilize a weakening rupee and prevent any potential rise in interest rates due to dollar sales from forex reserves.
Liquidity injection
Banking system liquidity surplus averaged below ₹2 trillion
The first leg of the swap is set to be settled on Friday, which will see the RBI injecting rupee liquidity back into the banking system. This comes as India's banking system liquidity surplus has averaged below ₹2 trillion ($20.93 billion) so far in May, less than 0.8% of deposits. The Indian rupee has been hitting new lows, including a record low of 96.96 per dollar last week.