Rupee Hits 17-Day Low: RBI’s FCNR(B) Swap Closure Triggers Fall
Trader monitors Indian Rupee exchange rate on trading floor
Key Highlights
The Indian rupee fell to a 17-day low of 95.61 against the dollar after the RBI’s early closure of its FCNR(B) swap facility and rising crude oil prices.
The Indian rupee experienced significant depreciation on Monday, closing at a 17-day low of 95.61 against the US dollar. This downturn was primarily triggered by the Reserve Bank of India’s (RBI) early termination of its concessional swap facility for FCNR(B) deposits, alongside a surge in crude oil prices.
Key Figures from the Rupee’s Fall
- The rupee closed at a 17-day low of 95.61 against the dollar.
- Crude oil prices surged to nearly $90 a barrel.
- The rupee was the worst-performing currency across Asia, despite a weaker dollar.
The RBI’s decision to advance the closure of the FCNR(B) facility surprised markets, leading to importers rushing to secure forward cover. This unexpected move prompted currency experts to weigh in on the central bank’s strategy and its implications for currency stability.
Understanding RBI’s FCNR(B) Swap Facility
The Reserve Bank of India advanced the deadline for mobilizing funds under the FCNR(B) facility to August 31, moving it up from the originally scheduled September 30. However, other avenues for foreign currency mobilization, such as external commercial borrowing (ECB) and overseas foreign currency borrowing (OFCB) windows, will remain open until December 31.
Market Reactions and Central Bank Signals
expert Jamal Mecklai noted that the market reacted to what he termed