Indian rupee rally boosts corporate interest in FX swap

The Indian rupee has recently strengthened, and this, along with lower hedging costs, is likely to attract companies to participate in the Reserve Bank of India's $10 billion foreign exchange swap next week. On Wednesday, the central bank will collect $10 billion from the market and provide an equivalent amount of rupees to banks, reversing a similar operation conducted last month. Bidding for this swap will take place on Monday. The Reserve Bank's swaps aim to improve liquidity in the banking system as the economy slows down. Recently, the rupee was valued at around 87.30 against the U.S. dollar, and hedging costs were much higher than now. This week, the rupee reached a two-month high of 86.20, and hedging costs have dropped to 6.00-6.20 rupees. Experts believe this situation offers an attractive opportunity for companies looking to manage their dollar expenses and secure funding in rupees. B. Prasanna, from ICICI Bank, noted that the current rates allow companies to lock in a lower cost than borrowing directly in rupees. Bankers have pointed out that the longer timeframe between the RBI's announcement and the bidding date gives companies and banks more time to prepare. Many companies are likely to show interest in this opportunity, especially larger firms aiming to capitalize on the favorable rates. The expected cutoff rate for the swap auction could be between 5.70 and 5.90 rupees, down from a previous auction's cutoff of 6.55 rupees.