Indian Rupee: RBI defends manageable Dollar shorts – BNY

BNY Mellon’s Geoff Yu highlights comments from RBI Governor Sanjay Malhotra that the central bank’s net-short forward-Dollar position is still very manageable despite large bearish bets to support the Rupee. Malhotra stressed a market-determined exchange rate, data-driven intervention calibration, stronger-than-expected inflows, and diminishing benefits from additional swapped Dollars as sterilization costs rise.

Rupee support as swap costs rise

"The Reserve Bank of India’s net-short forward-dollar position remains “very manageable,” Governor Sanjay Malhotra said, despite the central bank’s large bearish dollar bet built over the past two years to support the rupee."

"He said the exchange rate remains market-determined, while intervention is still aimed at curbing excessive volatility and speculative activity."

"Malhotra defended the early closure of the FCNR(B) swap window as a data-driven calibration, not a policy reversal."

"He also said inflows into India have been stronger than expected and that the RBI expects at least $80bn from recent measures to attract foreign currency, including FCNR(B) deposits, external commercial borrowings, and overseas foreign-currency borrowings."

"He added that each additional swapped dollar offers diminishing benefits, while sterilization costs rise."