Indian rupee to rise as offshore traders cut bearish bets, RBI clarifies hedging rules

Business Recorder reported that the Indian rupee is expected to strengthen despite weakness across other Asian currencies, as offshore traders reduced their bets against it. Traders expect the currency to open between 94.75 and 94.80 per dollar, after it closed Thursday at 95.0550. Support is also coming from expectations that the central bank will keep selling dollars, while the non-deliverable forward rate trades below the onshore rate, which is rare.

This week the rupee has followed a separate path, helped by a series of RBI steps to curb dollar demand. A reserve requirement on some large forward dollar purchases confused bankers, because it was unclear which transactions were covered, and this triggered sharp turbulence in the forward market. Several banks stopped quoting prices to one another, which reduced liquidity and magnified price swings.

Clarifications from the RBI came after Thursday's market close, and a bank treasury official said they helped considerably, though some ambiguities and doubts persisted. Forward premiums climbed this week as liquidity tightened and banks trimmed their holdings, and the official believes the clarifications could ease these disruptions.