RBI To Control Falling Rupee Through Currency Swap – Economics

Table of Contents

WHAT IS CURRENCY SWAP ARRANGEMENT?

The word swap means exchange.
A currency swap between the two countries is an agreement or contract to exchange currencies with predetermined terms and conditions.

WHY IT IS DONE?

It is mainly done,
To meet short term foreign exchange liquidity requirements

IMPACT ON RUPEE?

“Mismatches in US dollar liquidity have become accentuated across the world.
On a review of current financial market conditions and taking into consideration the requirement of US dollars in the market, it has been decided to undertake six-month US dollar sell/buy swaps to provide liquidity to the foreign exchange market,” the RBI said.
The swap would be conducted on March 16, the RBI said.
To begin with, the central bank is conducting $2 billion of dollar sell/buy swaps.

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