Rupee weakens as RBI shortens FX swap deadline
The Indian rupee slid to around 95.49 per dollar, hitting two-week lows after the RBI unexpectedly moved up the FX swap cutoff for FCNR(B) discounted hedging to August 31 from September 30.
The Indian rupee weakened to around 95.49 per dollar, reaching two-week lows as the Reserve Bank of India unexpectedly shortened the deadline for its discounted forex swap facility for non-resident deposits, raising concerns over future dollar inflows.
The RBI brought forward the cutoff for the zero-cost hedging facility for FCNR(B) deposits to August 31 from September 30, despite more than $50 billion in inflows through the scheme.
The move weighed on sentiment as elevated oil prices continued to pressure the currency and importer hedging demand remained strong.
The rupee's decline came despite a softer dollar following weak US retail sales data, which reduced expectations of a Federal Reserve rate hike next month.
Meanwhile, the RBI continued selling dollars through state-run banks to cushion the rupee, while stronger foreign-exchange reserves, which rose to a four-month high of $707 billion through August 7, provided the central bank with greater room to support the currency.