Rupee Jumps 1.4% In Early Trade After RBI Tightens Speculative Trades

The Indian rupee rose sharply in early trade on Thursday. It gained 1.4% to touch 93.53 against the US dollar (USD) after the Reserve Bank of India (RBI) tightened rules on speculative trading. The move triggered expectations of heavy dollar selling in the onshore market as traders rushed to unwind positions. At 9:59 am, the rupee stood at 93.36 against the USD.

Sweeping Move By The RBI

Analysts attributed the surge to the central bank’s latest steps to directly target arbitrage-driven flows and speculative bets that have weighed on the currency in recent months. Market participants said the restrictions forced traders to cut exposure, leading to a quick rebound in the rupee.

On Wednesday, the RBI barred banks from offering rupee non-deliverable forwards (NDFs) to both resident and non-resident clients. It also stopped companies from rebooking cancelled forward contracts. These measures disrupt a large offshore market where the rupee is actively traded.

As per data, the offshore NDF market sees daily volumes of about $149 billion. The RBI’s action is among the toughest in more than a decade. It aims to bring more stability to the currency by limiting speculative pressure.

The rupee had come under sustained pressure this year and slipped to record lows. Pressure has also come from a widening current account gap and muted foreign inflows. At the same time, tensions around the Iran conflict have weighed on sentiment, adding to the rupee’s recent weakness.

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Precious Metals Slide Amid Volatility

While the rupee surged, the commodity markets saw sharp moves. At 10:08 am, Gold June futures on the Multi-Commodity Exchange (MCX) stood at ₹150,405 per 10 grams, down by 2.15%. Silver May futures, on the other hand, stood at ₹230,653 per kg, down by 5.28%.

Market participants linked the decline to a spike in crude oil prices, rising US bond yields and strength in the dollar index. These moves point to growing volatility across markets as geopolitical tensions intensify.

Sources:

The Economic Times

Reuters