RBI’s sell-buy swaps slow rupee’s fall but push up forward premiums, making hedging costlier for foreign investors
The Reserve Bank of India is engaged in dollar sell-buy swaps to stabilize the rupee's value. However, this has resulted in higher forward premiums, making it expensive for foreign investors to hedge. As a consequence, some foreign investments in rupee-denominated assets may decline. Additionally, companies are opting to borrow in rupees and exchange for dollars due...
Key Takeaways
- The Reserve Bank of India is engaged in dollar sell-buy swaps to stabilize the rupee's value.
- However, this has resulted in higher forward premiums, making it expensive for foreign investors to hedge.
- As a consequence, some foreign investments in rupee-denominated assets may decline.
The Reserve Bank of India is engaged in dollar sell-buy swaps to stabilize the rupee's value. However, this has resulted in higher forward premiums, making it expensive for foreign investors to hedge. As a consequence, some foreign investments in rupee-denominated assets may decline. Additionally, companies are opting to borrow in rupees and exchange for dollars due to favorable local rates.
Original Publisher Attribution
This summary was curated from Economic Times.