Rupee at 95.05 per US dollar after RBI 20% rule
The rupee got a boost on Thursday, closing at 95.05 per US dollar, up 10 paise from yesterday.
This jump comes after the Reserve Bank of India (RBI) imposed a 20% cash reserve requirement on large forex derivatives contracts over $2 million, which pushed forward premiums to their highest level in more than four years.
Some traders said the one-year forward premium closed to 4.5%, its highest level since January 2022 while some quotes were seen as high as 10%, traders said.
RBI rule raises hedging costs 150bps
The RBI now requires banks to keep more cash aside for large currency derivative deals (over $2 million), making it pricier, by about 150 basis points, for companies to hedge against currency swings.
That's made the market less active, with importers stepping back due to higher costs.
The spot rupee also rose by 2% this week, as these moves aimed at curbing speculative trading.