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The Indian rupee opened higher against the US dollar on Monday, October 12, after the Reserve Bank of India (RBI) introduced measures to curb speculation and maintain stability in the foreign exchange market.
The domestic currency appreciated by more than 1 per cent to open at 95.76 against the dollar.
Offshore trading saw the rupee strengthen after the central bank announced some of its strongest measures to support the currency since the 2013 taper tantrum.
According to NDTV Profit, one-month non-deliverable forwards showed the rupee gaining as much as 2.7 per cent to 94.17 per dollar before trimming the advance to 0.7 per cent.
The RBI lowered the threshold for unhedged forex derivatives from $100 million to $5 million and introduced a 20 per cent Foreign Exchange Risk Reserve (FERR) for eligible contracts.
Users cannot rebook cancelled rupee-linked contracts but can roll them over at maturity. They must confirm they have not hedged the same exposure through another dealer.
Dealers must maintain a daily RBI cash reserve equal to 20 per cent of eligible contracts exceeding $2 million for current account hedging. The reserve remains until the contracts end.
The RBI warned that bypassing the rules through multiple transactions would violate regulations and ordered daily FERR reporting.
On Saturday, it announced a special window to meet state-run oil companies’ dollar needs as the rupee neared a record low of 97 per dollar.
Societe Generale strategist Galvin Chia said the measures highlighted the challenges facing the RBI’s currency defence.
Analysts expect further intervention if pressure on the rupee intensifies.
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