The Indian rupee opened the week on a negative note, depreciating 17 paise to 95.59 against the US dollar in early trade, according to Business Today, as investor sentiment turned cautious after the Reserve Bank of India (RBI) brought forward the cut-off date for its concessional FCNR (B) deposit swap facility.
FCNR (B) swap deadline moved to August 31
Business Today reported that the RBI said on August 14 the swap facility would be available only for FCNR (B) deposits mobilised until August 31, bringing forward the earlier September 30 deadline. The facility was introduced to encourage foreign currency inflows. The central bank said on Friday that the concessional swap facility had attracted $56.84 billion as of August 13.
Under the FCNR (B) scheme, banks offer attractive interest rates to mobilise foreign currency deposits, the report noted.
Rupee, dollar index and crude
At the interbank foreign exchange market, the rupee opened at 95.50 on Monday before slipping further to 95.59. The domestic currency had closed at 95.42 against the US dollar on Friday, gaining 3 paise.
Meanwhile, the dollar index was at 99.54, down 0.12 per cent, according to Business Today. Brent crude, the global oil benchmark, rose 0.47 per cent to $88.94 per barrel in futures trade.
Equities and capital flows
Domestic equities also opened lower, with the Sensex declining 284.85 points to 77,717.05 and the Nifty falling 69.25 points to 24,297.05. Foreign institutional investors remained net buyers of Indian equities on Friday, purchasing shares worth Rs 508.12 crore, according to exchange data cited by Business Today.
Forex reserves strengthen
India's foreign exchange reserves strengthened sharply in the latest reporting week. The reserves increased $14.136 billion to $707.002 billion in the week ended August 7, the RBI said on Friday, according to Business Today. This followed a $10.512 billion increase to $692.866 billion in the week ended July 31.
| Metric | Week ended Aug 7 | Week ended Jul 31 |
|---|---|---|
| Forex reserves | $707.002 billion | $692.866 billion |
| Weekly change | +$14.136 billion | +$10.512 billion |
Outlook from CR Forex Advisors
CR Forex Advisors MD Amit Pabari said the inflows attracted through the facility had provided significant support to the rupee, but the market could start looking beyond this temporary support.
"After attracting nearly $50 billion of forex inflows, the central bank has now announced that the facility will be available only for deposits mobilized until August 31, 2026. The support from these inflows remains significant, but the market will eventually begin looking beyond this temporary cushion."
Pabari said the rupee could continue to find support in the near term, although the risk-reward remained tilted towards weakness. "Technically, the 95.20–95.30 zone is likely to act as an important support area. As long as this level holds, USD/INR could gradually move towards the 96.20–96.50 region in the coming days," he added.
Implications for corporate treasuries
For treasury professionals tracking the FCNR (B) facility, the August 31 cut-off means the concessional swap window will close earlier than originally scheduled. Business Today reported that the facility had attracted $56.84 billion as of August 13, and Pabari's comments suggest the market is beginning to price in the withdrawal of that temporary support. With the rupee trading at 95.59 and technical support seen in the 95.20–95.30 zone, the near-term path for USD/INR will depend on whether that level holds. Companies with unhedged dollar exposures may need to watch the 96.20–96.50 region, which Pabari identified as the potential upside target.
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