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MARKET EYE-RBI continues interventions in FX forward markets
July 16, 2012 / 7:58 AM / 5 years ago

MARKET EYE-RBI continues interventions in FX forward markets

* RBI continues to intervene in FX forwards to prevent a rupee
shortage in money markets triggered by dollar sales in spot
* Data last week showed RBI sold $482 million in spot markets in
May, while its total outstanding forward dollar sales tripled to
$10.31 billion from $3.45 billion in April. 
* That intervention has rippled into the onshore implied rupee
yield curve: the spread between the one-year rate 
is trading as much as 100 pips above the one-month.
In late May the negative spread had been as high as 110 pips.
* The steep inversion of the offshore forward curve indicates
RBI continues its interventions at the longer end of the curve,
while short-term hedging by importers and foreign investors, and
lack of dollar demand also contribute.
* ICICI Bank says some of that severe money market dislocations
is improving gradually thanks to a sudden rise in rupee
liquidity in a cash-starved money markets and to the rupee


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