MUMBAI: The rupee has lost its steam and has fallen below 95 again with the central bank reportedly tapping a $115 billion worth of dollar swaps to drain out excess liquidity that has crossed Rs 11-trillion mark following, and crude was back on the boil shooting past the $100-a-barrel-mark following renewd hostilities in the Middle East.
The rupee opened on a weak note Wednesday, losing 21 paise to 94.95 against dollar and went on to lose more plunging 34 paise close at 95.08.
The main reason for the rupee pain is the higher crude price that crossed the $100-per-barrel-mark, stoking concerns over inflation and high forex outflows, a trader said, adding weak equity markets and continuing FII outflows also pressurised the rupee, he added.
Brent crude surpassed $100 mark for the first time in almost six weeks after attacks on many Saudi oil facilities and ships threatened to weaken the already strained supply chains. Brent crude was trading higher by 2.94 per cent at $100.73 by 1930 hrs.
In addition to spot dollar sales, the central bank also likely conducted forex swaps maturing in September and October to drain excess rupee liquidity from the banking system, market soruces said.
The dollar interventions helped the rupee close at 95.08, avoiding steeper losses.
Meanwhile, dollar-rupee forward premia jumped with traders pointing to likely sell/buy swaps to the tune of $115 billion conducted by the central bank for near-tenor maturities. In dollar swaps, the RBI sells dollars to banks for rupee which will be bought back later, helping the central bank drain out excess cash in the system that has crossed Rs 11 trillion mark now.
"Sell-buy swaps could lift forward premia, potentially supporting the the rupee by improving hedging incentives for exporters," a trader said.
On Wednesday, the one-year dollar-rupee forward implied yield climbed 11 bps to a more than three-month high of 3.16%. A weak dollar, however, cushioned the fall, forex traders said.