RBI, Sebi move in tandem to rein in Rupee punters !!! The rupee snapped a two-day losing streak to close Tuesday at 60.14 to the dollar – up 47 paise, or 0.8%, from the previous close – as the banking and market regulators stepped in to cut speculative trading. The Reserve Bank of India (RBI) barred authorised dealer (AD) banks from carrying out any proprietary trading in the currency futures and options markets. In other words, any transaction by AD Category-I banks will have to be necessarily on behalf of their clients, the RBI said. The Securities and Exchange Board of India (Sebi), on the other hand, clipped open position limits of clients and non-bank trading members. “In consultation with the RBI and in view of the recent turbulent phase of extreme volatility in dollar-rupee exchange rate, it has been decided to curtail position limits and increase margin requirements for currency derivatives,” the capital market regulator said. According to the Sebi circular, effective Thursday, the gross open position of a client across all contracts shall not exceed 6% of the total open interest or $10 million, whichever is lower. The gross open position of a trading member, which is not a bank, across all contracts, shall not exceed 15% of the total open interest or $50 million, whichever is lower. Also, the initial and extreme loss margins were doubled for dollar-rupee contracts in currency derivatives. The announcements helped contain volatility in the forex market in the 59.72-60.48 range during the day despite the dollar index – a measure of the dollar’s value against six global currencies – rising to 84.38 levels in intraday trade from 84.19 a day ago. There were also talks that oil marketing companies have been asked to meet their dollar requirements from one bank rather than inviting bids from multiple banks. What’s more, inflows from foreign institutional investors were lacklustre at Rs 165 crore. On Monday, the rupee had hit a lifetime intraday low of 61.21 to the dollar. But on Tuesday, the local currency was among the top three best performing currencies in the emerging markets basket. Activity in currency futures and options markets spiked to 62 lakh contracts worth Rs 38,000 crore on Tuesday, up from 52 lakh contracts worth Rs 33,000 crore on Monday and 37 lakh contracts worth Rs 22,000 crore traded last Tuesday, as per data from the National Stock Exchange. But the Street was left asking for more from the government. “The measures taken by the market regulators to bring in some semblance of stability are only temporary and the government needs to take corrective policy decisions to boost the market sentiment,” said Abhishek Goenka, founder & CEO, India Forex Advisors.
Posted on: Wed, 10 Jul 2013 05:38:34 +0000