Reserve Bank of India tightens dollar curbs to support rupee
The central bank cut dollar demand and drained banking liquidity, while the rupee sits close to its all-time weakness and bond yields climb.
By Standard Topic. AI-generated from the reporting listed under Coverage. Published . Updated .
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What happened
The Reserve Bank of India moved to curb dollar demand, redirecting oil companies' dollar purchases away from the spot market and tightening hedging rules. Banks grew cautious about offering forward dollar hedges, and bankers said they were unclear how the new cash-margin requirement applies to rupee derivatives.
Why it matters
The rupee rose about 1% on Monday after the measures, but Indian government bond yields rose to their highest level in more than three years.
Timeline
- Oct 11, 9:15 PM ET: The rupee jumped in the non-deliverable forward market after the Reserve Bank of India stepped up support for the currency.
- Oct 12, 12:54 AM ET: The 10-year bond yield topped 7.35% as the central bank's liquidity clamp down weighed on government bonds.
- Oct 12, 3:14 AM ET: The central bank planned to sell 250 billion rupees in bonds on Tuesday.
- Oct 13, 12:13 AM ET: Bankers said the new forex curbs had caused confusion and that they were waiting for clarity before quoting rupee derivatives.
Coverage
- India's frequent FX rule changes raise concerns over policy predictability, Allianz exec says (TradingView)
- Rupee Gets Some Relief But With Disruptions In Financial Markets (NDTV)
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