RBI's increased intervention in forwards market to aid exports

To help manage excess liquidity

by Janhavi Behere

The RBI bought USD 8 billion of foreign currency in forwards market in March 2017, the highest in almost three years, as per media reports. When intervening in the forwards market, RBI purchases dollars in the spot market and subsequently sells them. It then buys dollars in the forwards market to push back the liquidity injection to a future date. Currently, there is surplus liquidity in the banking system. In addition to excess liquidity, India’s exports may face the burnt of a strengthening rupee. The RBI’s forwards intervention strategy will incentivise exporters to hedge more and cause importers’ hedging to fall thereby controlling surplus liquidity. RBI’s increased intervention is likely to keep foreign-exchange swap rates at an elevated level, preventing further strengthening of the rupee and improving exports.

References
1. http://www.livemint.com/Industry/QoIGeXmgk5A1rRgHt0iglJ/RBI-targets-rupee-forwards-as-cash-hinders-spot-intervention.html
CMIE STATISTICS
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Consumer Sentiments Index
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Quarterly CapeEx Aggregates
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Quarterly Financials of Listed Companies
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All listed Companies
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Non-financial Companies
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 Net fixed assets 9.2 18.1
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Annual Financials of All Companies
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All Companies
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Non-financial Companies
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