India Swaps Window May Attract $15 Billion in Rupee Boost

India’s dollar-swaps window will attract about $15 billion before it closes next month, bolstering the rupee, two officials with direct knowledge of the matter said.

The amount would exceed both the Reserve Bank of India’s and the government’s earlier expectations, the officials said, asking not to be identified as the projections are private. Total funds moving through the window have slowed in recent weeks from an initial surge last month, said one of the officials, who works in the Finance Ministry.

RBI Governor Raghuram Rajan last month offered concessional swaps for banks’ foreign-currency deposits and borrowings until Nov. 30 to woo dollars and boost the smallest foreign-exchange reserves in major emerging nations. The RBI said the step has garnered $10.1 billion as of Oct. 23.

The measure has contributed to a 12 percent climb in the rupee against the U.S. currency from a record low in August, the biggest appreciation in the world in that period. The rupee closed little changed today at 61.46 per dollar, erasing losses of as much as 0.5 percent.

“The swaps facility played an important role in attracting foreign inflows and soothing the rupee,” said Debendra Kumar Dash, a Mumbai-based fixed-income trader at Development Credit Bank Ltd. The currency will remain around current levels this year, Dash said.

The rupee has slumped 13 percent versus the dollar in the past 12 months, hurt by India’s current-account deficit, elevated inflation, slowing economic growth and concern that the U.S. Federal Reserve could taper monetary stimulus.

Increasing foreign reserves is the key to rupee stability, according to Bank of America Merrill Lynch. They have dropped about 13 percent to $281 billion since a 2011 peak.

That’s the lowest in the BRIC group of large emerging nations. Among the other members, China has $3.66 trillion, Russia about $511 billion and Brazil $378 billion.

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