To address durable liquidity needs, RBI will conduct a long-term USD-INR Buy/Sell swap auction.
This will provide rupee liquidity for a longer duration.
Swap Auction Details:
RBI will conduct a USD-INR Buy/Sell swap auction worth $10 billion.
Tenor: Three years.
Auction Date & Time: February 28, 2025, from 10:30 am to 11:30 am.
Spot Date: March 4, 2025.
Far Leg Date: March 6, 2028.
Bidding Process:
Market participants must place bids in terms of the premium they are willing to pay, expressed in paisa terms (up to two decimal places).
The auction cut-off will be based on the premium.
It will follow a multiple-price based auction system, meaning successful bids will be accepted at their respective quoted premiums.
Previous Swap Auction:
This is the second swap auction in a month.
On January 31, 2025, RBI infused $5.1 billion through a six-month swap.
Market Impact & Expert Opinion:
Short-term positive impact on the rupee expected.
The swap mechanism helps stabilize the currency by providing immediate liquidity support.
Can mitigate pressure on the rupee during foreign fund outflows and reduce exchange rate volatility.
Spot USD-INR may move towards 86.30, according to Dilip Parmar, Research Analyst at HDFC Securities.
Eligible Participants:
Authorised Dealers (ADs) – Category-1 banks can participate in the auction.
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