Rupee Rebounds 91 Paise To 95.80, RBI Forex Measures Fuel Recovery

Mumbai, October 12: The Indian rupee rebounded by 91 paise to 95.80 against the US dollar on October 12, according to early trading reports. This rise occurred after the Reserve Bank of India implemented measures to curb currency volatility and limit speculative positions. The currency had opened the prior day at 95.61 but later fell back.

The rupee had closed on Friday at 96.71, marking a significant recovery from its record low of 96.88 the previous day. The Reserve Bank of India (RBI) introduced a dollar window specifically for oil marketing companies through designated banks, coupled with stricter rules for foreign exchange derivatives.

These steps were taken to reduce the demand for dollars in the spot market and bolster risk management practices. Forex analysts believe these measures may assist the rupee in withstanding pressures stemming from high crude oil prices and a stronger dollar.

On October 10, the RBI prohibited authorized dealers from allowing the rebooking of cancelled rupee-linked foreign exchange derivative contracts, except for rollovers at maturity. Additionally, the RBI lowered the cap on derivative transactions without an established underlying exposure to $5 million from $100 million across authorized dealers and recognized stock exchanges.

To further mitigate currency risk, dealers are now required to place cash with the RBI equal to 20% of the rupee equivalent of the notional value of qualifying contracts. This requirement applies to contracts exceeding $2 million used to hedge current-account exposures involving foreign currency purchases against the rupee.