The Indian rupee weakened to around 95.49 per dollar, hitting a two-week low after the Reserve Bank of India unexpectedly advanced the deadline for its discounted forex swap facility for non-resident deposits, stoking concerns about future dollar inflows. The RBI moved up the cutoff for the zero-cost hedging facility on FCNR(B) deposits to August 31 from September 30, even after the scheme had attracted more than $50 billion in inflows. The decision dampened sentiment at a time when elevated oil prices were already pressuring the currency and hedging demand from importers remained strong.
The rupee’s slide occurred despite a softer US dollar, as weak US retail sales data reduced the likelihood of a Federal Reserve rate hike next month. In the meantime, the RBI continued to intervene in the market by selling dollars through state-run banks to limit the rupee’s losses. Robust foreign-exchange reserves, which climbed to a four-month high of $707 billion as of August 7, gave the central bank additional capacity to support the currency.
