MUMBAI — India's central bank has announced fresh measures to defend the rupee, opening a special window to meet the entire daily dollar requirements of three state-run oil marketing companies from Monday, October 12.
The Reserve Bank of India said on Saturday that Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum will be able to access US dollars directly from its foreign exchange reserves through designated banks. The facility will remain in place until further notice. The central bank did not disclose the volume of foreign exchange expected to be supplied or the pricing mechanism.
New curbs on currency derivatives
The RBI paired the dollar window with tighter rules for the foreign exchange market. It slashed the limit for positions in exchange-traded currency derivatives involving the rupee to $5 million from $100 million, and asked forex dealers to maintain a risk reserve equal to 20 percent of the notional amount of each rupee derivative contract. Forex dealers will also not be allowed to permit users to rebook foreign exchange derivatives.
The moves come after the rupee fell to within striking distance of its record low. The currency closed Friday at 96.73 per dollar, according to Reuters — barely changed from its previous close and near its all-time weakest level of 96.96 reached in May. CNBC TV18 reported a Friday close of 96.71, up 17 paise from Thursday's 96.88, with the recovery attributed to a softer dollar, easing crude prices and likely central bank intervention.
Draining reserves
The pressure on the currency has come at a cost. India's foreign exchange reserves fell $12.95 billion to $734.6 billion in the week to October 2, the fourth straight weekly decline — down about $51 billion from the record $785.7 billion reported in early September. The decline has been tied to RBI intervention to support the rupee amid higher oil prices.
The central bank had already raised its policy repo rate by 25 basis points to 5.50% earlier in the week, its first hike since February 2023. In Saturday's thin trading, the rupee rallied in the non-deliverable forward market, with the one-month dollar-rupee contract falling about 40 paise, one trader said.
Sources:
- India central bank takes steps to support rupee, opens dollar window for oil companies — Reuters
- RBI steps up rupee support, opens dollar window for oil companies — The Hindu BusinessLine
- RBI opens special dollar window for three state run oil companies from October 12 — Business Today
The Reserve Bank of India said on Saturday that Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum will be able to access US dollars directly from its foreign exchange reserves through designated banks. The facility will remain in place until further notice. The central bank did not disclose the volume of foreign exchange expected to be supplied or the pricing mechanism.
New curbs on currency derivatives
The RBI paired the dollar window with tighter rules for the foreign exchange market. It slashed the limit for positions in exchange-traded currency derivatives involving the rupee to $5 million from $100 million, and asked forex dealers to maintain a risk reserve equal to 20 percent of the notional amount of each rupee derivative contract. Forex dealers will also not be allowed to permit users to rebook foreign exchange derivatives.
The moves come after the rupee fell to within striking distance of its record low. The currency closed Friday at 96.73 per dollar, according to Reuters — barely changed from its previous close and near its all-time weakest level of 96.96 reached in May. CNBC TV18 reported a Friday close of 96.71, up 17 paise from Thursday's 96.88, with the recovery attributed to a softer dollar, easing crude prices and likely central bank intervention.
Draining reserves
The pressure on the currency has come at a cost. India's foreign exchange reserves fell $12.95 billion to $734.6 billion in the week to October 2, the fourth straight weekly decline — down about $51 billion from the record $785.7 billion reported in early September. The decline has been tied to RBI intervention to support the rupee amid higher oil prices.
The central bank had already raised its policy repo rate by 25 basis points to 5.50% earlier in the week, its first hike since February 2023. In Saturday's thin trading, the rupee rallied in the non-deliverable forward market, with the one-month dollar-rupee contract falling about 40 paise, one trader said.
Sources:
- India central bank takes steps to support rupee, opens dollar window for oil companies — Reuters
- RBI steps up rupee support, opens dollar window for oil companies — The Hindu BusinessLine
- RBI opens special dollar window for three state run oil companies from October 12 — Business Today
