Rupee To Be Stable? India And Japan Sign a $75 Billion Currency Swap Agreement To Fight Volatility 

In a bid to arrest the volatility in the value of rupee, India has signed a currency swap agreement with Japan, to the tune of $75 billion, as reported by Reuters. This deal was signed on Monday (30 October) as part of a three-day visit of PM Modi to Japan.

“The Prime Ministers of India and Japan, building on great friendship between the two countries and to further strengthen and widen the depth and diversity of economic cooperation, agreed during Prime Minister Modi’s visit to Japan, to conclude a Bilateral Currency Swap Agreement for an amount of $75 billion,” the Indian government said in a statement. It added, “The agreement should help bring greater stability to foreign exchange and capital markets in India.”

The government mentioned that this agreement with Japan would go a long way in restoring the confidence in rupee and it will help Indian companies to acquire capital from foreign markets at cheaper rates.

This currency swap agreement will allow India to pay Japan in rupees for the loans taken by the former. Thus, instead of buying a third-party currency like the dollar, India could use its national currency to make interest and principal payments to Japan. This will increase the demand for rupee in the forex market and help maintain a healthy rupee-to-dollar ratio.