Rupee Records Sharpest One-Day Rise in Over 12 Years After RBI’s Tough Crackdown on Offshore Derivatives The Indian rupee surged sharply against the US dollar on Wednesday, marking its strongest single-day gain in over 12 years. This dramatic shift followed the Reserve Bank of India’s (RBI) stringent measures targeting offshore derivatives, which aimed to stabilize the currency’s volatile trajectory. The rupee climbed nearly 2% against the dollar, reaching a high of 92.82 per dollar, a level not seen since September 2013. This development comes amid a recent decline in the rupee’s value, which had previously hit a psychological barrier of 95 rupees per dollar in the previous week. The RBI’s intervention was announced on Wednesday, with immediate effect, to curb the excessive exposure of authorized dealers to offshore derivative markets. The central bank mandated that authorized dealers—banks authorized to conduct foreign exchange transactions—no longer offer non-deliverable forward (NDF) contracts to both resident and non-resident customers. These NDFs, which are cash-settled derivatives, had been a significant factor in the rupee’s recent depreciation, as they allowed investors to hedge against currency risks. By restricting these contracts, the RBI sought to reduce speculative pressures on the currency. Despite the ban on NDFs, the RBI allowed authorized dealers to continue offering deliverable foreign exchange derivatives, ensuring that customers could still manage their currency risks. However, a key condition was imposed: customers could not engage in parallel non-deliverable trades. This move aimed to prevent arbitrage opportunities that had previously exacerbated the rupee’s volatility. The rupee’s sharp rebound followed a period of significant weakness.#us_dollar #reserve_bank_of_india #rupee #non_deliverable_forward #authorized_dealers
