Dollar-rupee forward premiums soared on Wednesday after the Reserve Bank of India announced no new liquidity-withdrawal measures at its policy meeting. Traders are now bracing for more sell-buy foreign exchange swaps by the central bank.

The implied one-year dollar-rupee forward premium climbed 20 basis points to 3.66 percent, its highest level in six months. The one-year premium had already jumped 14 basis points on Tuesday amid likely sell-buy swaps by the RBI, traders said.

The sell-buy swaps are a key tool for draining surplus rupee liquidity. The central bank did not announce a cash reserve ratio hike or other fresh liquidity measures in Wednesday’s policy. Governor Sanjay Malhotra said the RBI would use an appropriate mix of liquidity management tools.

The rupee traded near 96.41 per dollar. At his post-policy press conference, Malhotra said financial markets can be irrational in the short run and that measures such as the real effective exchange rate suggest the rupee may be undervalued. He said the RBI does not target any specific exchange rate level.