Rupee Forwards Retreat After Central Bank Unveils Fx Swap, Spot Treads Water

Rupee forward premiums pulled back from multi-year peaks on Wednesday as traders drew comfort from the Reserve Bank of India's dollar-rupee buy/sell swap, while calm prevailed in the spot market with the rupee hovering sideways.

A glut of dollar liquidity combined with year-end balance sheet constraints had powered a sharp surge in forward premiums in recent sessions, prompting bankers to urge central bank intervention via buy/sell swaps.

Post market hours on Tuesday, the RBI announced it would conduct a 3-year $10 billion USD/INR buy-sell swap next month as part of broader measures to manage liquidity in the banking system.

Comfort from the central bank's move along with signs that state-run banks also received forward premiums on its behalf on Tuesday, helped bring down forward premiums on Wednesday.

The USD/INR January month-end forward premium eased to 41 paisa, down from a peak of 58 paisa hit on Tuesday. The November month-end premium retreated to 240 paisa, from a high of 278 paisa.

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"These steps will inject rupee liquidity while drawing out excess dollars, a balance aimed at easing tight market conditions and cooling the sharp rise in forward premiums," said Amit Pabari, managing director at FX advisory firm CR Forex.

Meanwhile, the rupee was down 0.1% at 89.70 per dollar on the day. Traders anticipate a relatively quiet close to the year after sharp moves in the first two weeks of December drove the currency to a record low of 91.0750 before it rebounded on aggressive RBI intervention.

On Wednesday, slightly elevated demand to buy dollars at the daily reference rate blunted the impact of a broadly weaker greenback. The dollar index was last at 97.9, hovering near a two-month low.

The rupee has declined about 5% for the year so far and is the worst performing Asian currency in 2025, bogged down by weakness in investment flows and the drag from steep US trade tariffs.