RBI Signals More Action to Tackle Forex Speculation
What Happened
RBI Governor Sanjay Malhotra said the central bank may introduce additional measures to curb speculative forex trading if required. He clarified that recent restrictions, including tighter rules on derivative contracts and a 20% reserve requirement on large FX trades, are not capital controls but designed to ensure markets serve genuine hedging needs. The RBI observed that nearly one‑third of trades were being cancelled and rebooked on the same day, indicating speculative activity. To stabilize the rupee, the RBI also opened a special dollar window for oil firms, restricted rebooking of cancelled contracts, and reduced limits for derivative trades without underlying exposure. The rupee strengthened in offshore markets, rising 0.8% to 95.01 per dollar after these steps.
Key Takeaways
The RBI is reinforcing its stance against short‑term speculative bets in forex markets, prioritizing stability and hedging needs. While measures raise compliance costs, they aim to protect the rupee and financial stability without restricting capital flows.