Rupee decline drives forward premium rates

AS A PART of its exchange rate management measure, RBI has been using other tools like active intervention in the NDF market and conducting mid-tenor buy/sell swaps, selling dollars for a future maturity, thus leaving rupee liquidity and forex reserves partly unaffected.

- 

However, the RBI's strategy of the buy/sell swaps in the mid to longer maturities has pushed those forwards lower. In mid-December, the 1-year implied yield fell below 2% for the first time in four months.