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Rupee firms but faces pressure after RBI FX swap facility shutdown
The RBI said it would close its FX swap facility for FCNR deposits a month early, after it had attracted nearly $57 billion.
The Indian rupee held up against the US dollar on Monday after two days of losses, with USD/INR trading around 95.60, but traders said the next phase could test the currency as the Reserve Bank of India winds down an FX swap tool.
FXStreet reported the RBI announced it would shut its FX swap facility for FCNR deposits a month ahead of schedule, citing that the deposit swap window helped attract nearly $57 billion. Market participants expect USD/INR to trade in a range of 95.00 to 95.50 this week, with some overseas clients potentially rushing to secure FX deposits before the facility closes on August 31.
The outlook is also being shaped by US data and rate expectations. Retail sales fell 0.6% month over month in July, and traders have scaled back bets on Federal Reserve hikes amid softer US inflation and growth signals.
FXStreet added that markets were pricing a 33.1% chance of a rate hike next month, down from 44% a week earlier, while investors look to the RBI minutes from the August policy meeting and consider whether the RBI starts a shallow rate hike cycle in December or keeps rates on pause for the rest of 2026.