RBI released the November monthly bulletin.
Operations in the OTC segment show RBI net bought $ 4.36 bn of foreign currency and accumulated the long forward book to the extent of $ 8.25 bn with total outstanding forwards at $ 8.49 bn. RBI had unwound the forward book from a peak of $ 65.79 bn in March 2022 to $ 241 mn in Oct 2022 on FPI outflows and rising trade deficit.
You could refer to the Oct 2022 data here.
A quick look at the pattern of outstanding RBI forward book shows that in the last 2 years, RBI is seen paying forwards in the last quarter of the FY. In 2021, RBI's forward book swelled from o/s longs of $ 47.38 bn in Jan 2021 to $ 72.75 bn in March 2021. In 2022, a similar pattern was observed where the book swelled from $ 50bn in Jan to $ 66 bn in March 2022.
The above data leans towards a pay on dips strategy. Interest Rate differentials are the primary drivers of FX Swaps with other factors like system liquidity, intervention, economic policy uncertainty also having a bearing on swaps pricing.
I will be confining to the monthly bulletin in this post and will be writing my thoughts around the interest differential view and forwards trading strategy in a later post.
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