Rupee Jumps 1.3% as RBI Cracks Down on Forex Speculation

The RBI has instructed banks to limit their net open positions in rupees in the foreign exchange market to $100 million, in a bid to curb speculative trading to cap decline in the Indian rupee.

It ordered banks acting as authorised dealers to limit their end‑of‑day open positions in the onshore rupee to $100 million. The central bank mandated that commercial banks must implement the daily cap by April 10, adding that the regulator may set different limits depending on evolving market conditions.

Estimates suggest that the magnitude of these positions ranges from $25 billion to over $50 billion.

In March, the rupee fell by more than 4 per cent amid the geo-political tensions. On Friday, the currency fell nearly 1 per cent to 94.8125, reaching 94.8400.

Analysts said concerns over elevated crude prices for a prolonged period are weighing on the currency and the broader macroeconomic outlook.

"With the West Asia conflict entering the fifth week, there are signs of escalation, including the Houthis joining the conflict and the US sending additional troops. Brent crude has again surged to around $116 per barrel," they said.

India's earlier 'Goldilocks' macroeconomic scenario of high growth, low inflation and stable deficits has weakened due to the conflict.

"Instead, we now face prospects of lower GDP growth, higher inflation, wider fiscal and current account deficits, and slower earnings growth in FY27," they added.

The analysts said the market has largely factored in these risks, as reflected in the decline in the Nifty's trailing price-to-earnings (PE) ratio to around 19.9 times, which they described as fair but not yet cheap. However, they pointed out that certain segments, particularly financials, remain attractively valued.

They further noted that the RBI's move to cap net open positions is likely to support the rupee in the near term.

"Unwinding of large dollar positions could strengthen the rupee in the near term," they said.

Sustained dollar demand and energy-led inflation risks are keeping the rupee under pressure, they added, noting that the bias remains weak unless crude prices see a meaningful correction.

Meanwhile, Brent crude futures surged as much as 3.66 per cent to an intraday high of $116.70 per barrel and were trading near their 52-week high, while US WTI futures stood at $103.38, up 3.75 per cent from the previous session.

- IANS