Archive · 23 Jul 2025
India's Dollar-Rupee Forward Premiums Rise Due to Market Changes
The cost of borrowing rupees in India went up overnight, and U.S. bond yields went down.
This caused the cost of forward currency contracts to increase.
Specifically, short-term contracts became more expensive.
The one-month contract rose in price, and the yield on one-year contracts also increased.
This happened because there was less money available in the Indian banking system.
Meanwhile, the value of the Indian rupee remained unchanged compared to the U.S. dollar.
India's dollar-rupee forward premiums increased across tenors.
The rise was attributed to the increasing cost of borrowing rupees overnight and a drop in near-term U.S. Treasury yields.
The one-month forward premium reached 12.50 paisa, while the 1-year implied yield increased to 2.05%.
Tighter rupee liquidity pushed up the overnight swap rate.
The rupee remained flat in the spot market, trading at 86.37 per U.S. dollar.
- Who
- The article does not explicitly mention who is involved, only the financial market movements.
- What
- India's dollar-rupee forward premiums rose.
- When
- July 23 (reported at 12:15 p.m.)
- Where
- India
- Why
- Due to rising overnight rupee borrowing costs and a dip in U.S. Treasury yields.
- One-month forward premium
- 12.50 paisa
- 1-year implied yield
- 2.05%
- 1-year U.S. Treasury yield
- 4.08%
- Rupee spot market
- 86.37 per U.S. dollar
- Overnight swap rate
- 0.38 paisa