A $5 Billion Currency Swap Is RBI's Answer to India's Cash Needs
- Central bank plans to hold dollar-rupee buy-sell swap auction
- RBI is telegraphing its discomfort with rupee strength: Kotak
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The ripple effects of the Reserve Bank of India’s unusual move to use foreign-exchange swaps to ease a liquidity deficit at banks ahead of national elections were felt across local currency, stocks and bond markets on Thursday.
Sovereign bonds fell as traders speculated that the measure would reduce the need for the central bank to buy debt via open-market operations, removing a key support for the market. The rupee weakened as some analysts saw the decision as a signal that the RBI isn’t comfortable with the currency’s recent gains, while some financial stocks cheered the planned liquidity infusion.