Indian rupee set to weaken after central bank curtails dollar inflow window

According to Business Recorder, the Indian rupee is expected to open lower on Monday and to stay under pressure during the trading session. The Reserve Bank of India unexpectedly brought forward by one month the end date for its discounted forex swap window tied to deposits made by non-resident Indians. Traders expect the currency to open between 95.60 and 95.64 against the dollar, after it closed Friday at 95.4250.

The move came even as the dollar eased, since soft American retail sales figures reduced bets on a Federal Reserve rate increase next month. The RBI said the change followed a strong reception to the swap scheme and the forex inflows it generated. A dealer at a private-sector lender termed the move startling, pointing out that inflows have far outstripped forecasts while oil prices and importers' hedging keep the rupee under strain.

Those deposits brought in more than $50 billion, pushing India's foreign-exchange reserves to $707 billion by August 7, their highest level in four months. Bankers said the central bank sold dollars through state-owned lenders in the week before, to prop up the currency.