Traders Say Indian Central Bank Likely Conducted Dollar-Rupee Buy/Sell Swap

Four traders told Reuters on Tuesday that the Reserve Bank of India (RBI) likely carried out a dollar-rupee buy/sell swap alongside its intervention in the local over-the-counter spot market to support the rupee.

Under a buy/sell swap arrangement, the RBI delivers U.S. dollars in the spot market while agreeing to reverse the transaction at a later date.

The rupee was last trading at 88.77 per U.S. dollar, showing little movement on the day but hovering just below its all-time low of 88.80 hit last week.

The central bank’s swap activity led to a decline in dollar-rupee forward premiums, with the one-year implied yield dropping six basis points to 2.23%, its lowest level in a month.