Traders may go long on rupee

There could also be a case for moving into financials and rate-sensitive areas

The Reserve Bank of India’s (RBI) new currency swap plan is worth comparing to the swap Raghuram Rajan set up in late 2013. The central bank will buy $5 bn from Indian banks, paying rupees and return the forex three years later, on agreed terms. The auction for this swap will be done this week.

The 2013 swap was an act of desperation. The rupee had fallen over 10 per cent, to all-time lows of Rs 67/USD in September 2013, as Rajan took charge at the RBI. The trade deficit and current account deficit were very high. Inflation was high.