RBI Cuts Deposit Swap Window, Boosts Indian Rupee Against US Dollar
The Indian Rupee (INR) strengthened against the US Dollar (USD) on Monday after two days of losses, trading at around 95.50. The Reserve Bank of India's (RBI) decision to close its FX swap facility for FCNR deposits a month ahead of schedule may lead to increased demand for dollars and push the pair higher in the coming period.
According to data released by the RBI, its policy measures, including the deposit swap window, successfully attracted nearly $57 billion. Market traders expect the USD/INR pair to fluctuate between 95.00 and 95.50 this week, with some anticipating a short-term rush among overseas clients aiming to secure FX deposits before the facility officially closes on August 31.
Analysts at Societe Generale note that India's inflation backdrop remains broadly contained, with headline CPI edging up modestly to 4.45% yoy in July from 4.38% in June. This reinforces the RBI's decision to keep policy on hold. The USD/INR pair also holds losses as the US Dollar (USD) declines amid weaker-than-expected US economic data and shifting central bank expectations.