RBI moves to support the rupee at 96.78, curbs forex derivatives (opens the source in a new tab)
- With the rupee at 96.78 to the dollar, near May’s record low of 96.95, the RBI barred rebooking of cancelled rupee forex derivative contracts and cut the limit for hedging without proof of exposure from $100m to $5m.
- Banks must keep a 20% cash reserve with the RBI on contracts above $2m where users buy foreign currency to hedge current-account payments.
- From 12 October the RBI will meet IOC, BPCL and HPCL’s entire daily dollar needs; reserves fell $12.95bn to $734.6bn in the week to 2 October, a fourth weekly drop.
- 96.78
- rupees per dollar
- $5m
- no-proof hedging limit, was $100m
- $734.6bn
- forex reserves, 2 Oct
Why it matters A weaker rupee makes fuel and imports dearer for India; the RBI is trying to stop speculation adding to the slide.
Other side Will tighter rules raise hedging costs for genuine importers? And if pressure persists, how long can falling reserves keep supplying dollars?