Rupee Relief: RBI's Forex Swap Cools Dollar Demand

The USD/INR overnight swap rate has softened to about 0.55 paisa, in line with current rupee call rates, following the Reserve Bank of India's (RBI) recent forex swap operation. The central bank's $10 billion USD/INR buy/sell swap auction on March 28, 2025, is designed to inject rupee liquidity and mop up excess dollars from the system. This step has served to cool dollar demand and stabilize forward premiums. The three-year tenor swap will provide a shot in the arm to the banking system to the tune of ₹86,000 crore, offsetting the existing liquidity deficit of ₹1.7 lakh crore. Market observers believe this intervention will soften liquidity conditions and keep overnight rates in proximity to the repo rate.

 

Source: Reuters, Reserve Bank of India