Noida, Apr 2 (APAC Media): The Indian rupee surged 1.4% to INR 93.53 against the U.S. dollar on Thursday after the Reserve Bank of India’s sweeping clampdown on currency speculation began to take effect, following corrective steps to close gaps that had weakened its initial intervention.
Therefore, the Reserve Bank of India (RBI) on Wednesday prohibited authorised dealers from offering rupee non‑deliverable forward (NDF) contracts to both resident and non‑resident clients, a move that directly affects the roughly $149 billion‑a‑day offshore rupee market.
In an official notification, the RBI stated that authorised dealers are prohibited from offering non‑deliverable derivative (NDF) contracts involving the Indian rupee to both resident and non‑resident clients.
The notification also instructs banks not to rebook or enter into derivative contracts with related parties that replicate previously cancelled positions.
“Our priority is to reduce excessive speculative activity in the forex markets and support orderly conditions in the rupee exchange rate,” said RBI Governor.
The policy shift follows a prolonged slide in the rupee, which has faced pressure from elevated global oil prices, geopolitical tensions, and volatile capital flows.
The rupee recently breached record lows, prompting earlier interventions such as capping banks’ net open positions in onshore currency markets.
“These measures are designed to ensure that the foreign exchange market functions as a hedging mechanism aligned with real economic activity, rather than as a platform for leveraged speculation,” he added.
The market responded quickly to the RBI’s directive. The rupee on thursday surged against the U.S. dollar, gaining over one rupee after the ban on offshore NDF trading took effect. Traders said the rebound was partly driven by a decline in speculative inflows following the central bank’s announcement.
The RBI has said it will continue to monitor conditions closely and adjust policy as needed to maintain financial stability.
However, economic analysts warned that although the measures could provide short-term relief, they might also curb market liquidity and widen the price gap between onshore and offshore currency markets.
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