A massive US$127 billion (S$161 billion) mobilisation through foreign-currency non-resident (FCNR) bank deposits far exceeded market expectations, and should bolster the Indian central bank’s capacity to support the currency. The rupee settled at 94.97 against the US dollar on Wednesday (Sept 2).
The country attracted a much larger-than-expected US$136.38 billion through special foreign-currency mobilisation schemes, the Reserve Bank of India said, swelling India’s FX reserves and providing RBI more scope to contain pressure on the rupee.
The bulk of the haul came from non-resident deposits, with a further US$3.89 billion raised through external commercial borrowings and $5.26 billion through overseas foreign-currency borrowings, the RBI said in a statement.
“An FCNR number of around US100 billion had been priced in. The actual figure is far higher than anyone had expected,” said a currency trader at a bank.
The sheer size of the inflows is likely to fuel another leg higher in the rupee, extending a rally that has surprised the market, he said.
He and two other traders said the impact of the figure was amplified by the RBI’s recent actions, with the central bank stepping up dollar sales and appearing increasingly intent on pushing the rupee higher.
Supportive Asian Cues
The rupee is also likely to draw support from strength in Asian currencies and a pullback in the dollar index, which has slipped below 99.50. The dollar’s retreat has been driven largely by a rally in the Japanese yen.
Investors are now awaiting fresh US economic data and comments from Federal Reserve officials for clues on the central bank’s policy path and whether it will raise rates this month.
Markets have recently increased bets on a Fed rate hike. They now assign a roughly two-in-three chance that the Fed will deliver a 25-basis-point rate increase this month, up from 37% a week back, according to CME Group’s FedWatch tool. REUTERS
