Rupee Declines 36 Paise Following RBI's Forex Regulation Rollback
Rupee falls 36 paise after RBI rolls back some forex curbs
The Economic TimesImage: The Economic Times
The Indian rupee fell by 36 paise to close at ₹93.49 per dollar due to a partial rollback of foreign exchange regulations by the Reserve Bank of India (RBI). This decision has heightened caution among banks regarding overseas currency derivatives, contributing to increased hedging costs.
- 01Rupee closed at ₹93.49 per dollar, down 36 paise.
- 02Rollback of forex curbs by RBI led to market uncertainty.
- 03Dollar-rupee forward premiums increased, raising hedging costs.
- 041-year forward yield rose by 10 basis points to 3.10%.
- 05Banks are cautious in offering non-deliverable forward contracts.
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On Tuesday, the Indian rupee weakened by 36 paise, closing at ₹93.49 per dollar, influenced by a partial rollback of regulatory measures by the Reserve Bank of India (RBI) that limited lenders' exposure to overseas currency derivatives. The rupee had previously closed at ₹93.13 per dollar on Monday. This regulatory change, announced after market hours on Monday, has led to increased caution among bank treasury heads, who are now hesitant to offer non-deliverable forward (NDF) contracts to corporate clients. Furthermore, uncertainty surrounding ongoing US-Iran negotiations has added to the rupee's downward pressure. As a result, dollar-rupee forward premiums have risen, with the 1-year forward yield increasing by 10 basis points to 3.10%, thereby raising hedging costs for businesses.
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The depreciation of the rupee could lead to higher costs for imports, affecting prices for consumers and businesses reliant on foreign goods.
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