RBI's forward book short dollar position hits record $200 billion in August

Data released by the Reserve Bank of India show its net short dollar exposure in the forward book surged to $200.06 billion at the close of August, up from $136.77 billion at the end of July. Short positions with less than one-year maturity rose to $55.15 billion, while those exceeding a year jumped to $176.57 billion, almost a two-fold increase. Long dollar positions also rose sharply to $31.66 billion, all set to mature within a month, bringing the net short amount for contracts under a year down to roughly $23.5 billion.

A market participant linked the expansion to FCNR(B) inflows and noted that, accounting for these flows, the longer-term short position should have been around $218 billion. The RBI has been conducting sell/buy swaps, including in September, which may have tempered the overall short exposure. Analysts expect the central bank to limit spot-market interventions as the dollars raised via the FCNR(B) swap facility will need to be returned over the next three to five years.