A Currency Strategy That’s Drawing More Hot Money to India
- Forward premiums hit four-year highs on RBI intervention
- RBI said last week forward premium rates are on its radar
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The Reserve Bank of India’s strategy to shift some of its currency intervention to the forwards market is adding to its problems.
Its balancing act to keep the rupee stable amid heavy foreign inflows while also keeping excess liquidity in check is flooding the market with more foreign funds, prompting a vicious cycle of interventions.