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INR: USD/INR Onshore Forward Premiums Fall to Lowest This Year Ahead of FX Swap

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The Indian rupee was unable to sustain a brief bout of strength at the of Monday’s session, with Reuters noting that the currency was pressured by dollar buying by state-run banks, likely on behalf of oil companies. USD/INR ended the session close to flat, with the pair contained within last week’s range.

  • Meanwhile, the USD/INR 1-year onshore forward premium fell to its lowest this year after the central bank announced a foreign-exchange swap worth $10bln late last week. That announcement marked the latest of a series of measures aimed at addressing liquidity concerns, and particularly the mismatch between onshore/offshore markets.
  • We have flagged recently that short-end offshore borrowing rates spiked higher as a likely consequence of the RBI’s activist approach to currency management. Its intervention has come amid a confluence of rupee-negative factors (e.g. RBI easing, US tariff threats, local equity outflows), prompting authorities to curb steeper losses despite expectations that the RBI under the new leadership of Governor Malhotra would be more tolerant of a weaker currency.
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The Indian rupee was unable to sustain a brief bout of strength at the of Monday’s session, with Reuters noting that the currency was pressured by dollar buying by state-run banks, likely on behalf of oil companies. USD/INR ended the session close to flat, with the pair contained within last week’s range.

  • Meanwhile, the USD/INR 1-year onshore forward premium fell to its lowest this year after the central bank announced a foreign-exchange swap worth $10bln late last week. That announcement marked the latest of a series of measures aimed at addressing liquidity concerns, and particularly the mismatch between onshore/offshore markets.
  • We have flagged recently that short-end offshore borrowing rates spiked higher as a likely consequence of the RBI’s activist approach to currency management. Its intervention has come amid a confluence of rupee-negative factors (e.g. RBI easing, US tariff threats, local equity outflows), prompting authorities to curb steeper losses despite expectations that the RBI under the new leadership of Governor Malhotra would be more tolerant of a weaker currency.