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USD/INR stays in 95.50 to 96.00 range despite swap inflows
DBS says FCNR (B) banks have raised about $72.8 billion via special swap schemes by Aug. 21, but the rupee has not strengthened due to spot-neutral flows, hedging demand, and intervention risk.
HousingWire reports that USD/INR has remained confined to a tight 95.50 to 96.00 range, even as higher funding through special swap schemes and rising FX reserves have failed to translate into broader rupee gains. DBS economist Radhika Rao attributed the lack of directional move to spot-neutral swap flows, hedging demand, and official intervention.
FXStreet also cited data from the FCNR (B) deposit program ahead of an end-month deadline, saying banks raised a cumulative $72.8 billion via the special swap schemes by Aug. 21. The note adds that this figure is up by roughly $20 billion since mid-Aug, with nearly 90% of the funds, about $65.4 billion, coming through the deposit program.
The report said the pace of raising accelerated in the past month, with the last $16 billion added in nearly a week compared with earlier periods at a similar scale over a fortnight. It warned that a sharp jump could push total FCNR funds to more than $70 billion to $75 billion, taking the broader total to above $80 billion to $90 billion.
FXStreet further pointed to portfolio flows and trade dynamics, noting August equities saw net inflows of $2.3 billion and debt inflows were nearly flat. Even with improving portfolio flows, the rupee faced persistent pressure from a large goods trade deficit, leaving USD/INR trapped as intervention risks prevented a break higher.