RBI's dollar-rupee sell-swap auction sees three times more bids

The Reserve Bank of India’s (RBI’s) dollar-rupee sell-swap auction saw three times more bids than the notified amount, which helped the Indian currency to post gains after six trading sessions.

In the auction, the RBI has accepted $5.135 billion against the notified amount of $5 billion, the central bank said in a release.

The sell-buy swap auction saw an overwhelming response of $13.56 billion bids with a cut-off premium averaging 649.71 paise.

“The implicit annualised forward rate works out to 4.22%. The dollars will be settled on March 10 and we may expect some cooling down of the currency, which ended at Rs 76.91/$,” said Madan Sabnavis, chief economist, Bank of Baroda.

“The move was largely interpreted as one to draw out liquidity and hence also help deliver higher dividends for the government. However, this comes at a time when the rupee is volatile and needs to be corrected,” Sabnavis said.

The central bank received 246 bids but accepted 86 of them in the auction, the release said. The bid to cover ratio was 2.71.

The rupee, which plunged to a record low on Monday, staged a comeback on Tuesday as it gained 5 paisa to close the day at 76.91/$.

“Rupee traded in a narrow range after remaining under pressure in the past few sessions. Uncertainty continues to keep market participants on the edge but on the domestic front higher global crude oil prices is disturbing the overall market sentiment,” said Gaurang Somaiya, forex & bullion analyst, Motilal Oswal Financial Services, said, “In the next couple of sessions, we expect the dollar-rupee (spot) to trade sideways with a positive bias and quote in the range of 76.40 and 77.20.”