In a bid to curb speculative trading to cap decline in the Indian rupee, the Reserve Bank of India (RBI) has ordered banks acting as authorised dealers to limit their end‑of‑day open positions in the onshore rupee to $100 million, in what is seen as an RBI rupee trading cap.
RBI Rupee Trading Cap Introduced Amid Currency Pressure
The domestic currency had slid to fresh lows amid widening trade gaps tied to the US-Israel and Iran conflict.
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.
Analysts said that the RBI rupee trading cap may be followed by additional measures if depreciation in rupee continues, adding that its support to the currency has sharply reduced its foreign-exchange reserves, limiting its ability to intervene aggressively.
Analysts Expect Possible Market Recovery
The domestic currency eased below the 94 per dollar mark for the first time on Friday, dipping almost 1 per cent against the greenback, leading to a cumulative of over 4 per cent since the start of the US-Iran war.
Brent crude trading well above $100 per barrel far above the $70 baseline assumption of the RBI in October has raised India’s import bill and complicated the central bank’s task of balancing inflation and currency stability.
A smart recovery is likely in Indian markets as the crude overhang wanes and price‑earnings (P/E) premiums contract, a recent report had said.
Emkay Global Financial Services, in its latest report, projected that the Indian rupee could bounce back toward Rs 91 per US dollar and the 10‑year government bond yield to ease to about 6.65 per cent from 6.83 per cent currently, with normalisation taking two to three months.
RBI Rupee Trading Cap Seen as Key Stability Measure
India’s overall economic position remains stable despite rise in fuel prices and crude oil prices will be crucial in shaping the country’s external balance in FY27, another report had said.
A sustained rise in global crude oil prices could significantly widen India’s current account deficit (CAD), and the RBI rupee trading cap is expected to play a key role in maintaining currency stability amid these challenges.
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