The Clearing Corporation of India has imposed an additional margin on dollar-rupee forward trades after witnessing significant volatility in the market, it said on Thursday.
Volatility margin imposed amid market swings
CCIL said it would levy a volatility margin of 20% of initial margin with immediate effect under its foreign exchange forward segment regulations.
It said the step would raise total margin use for the segment and would also apply to the dollar-rupee options segment when such a volatility margin is imposed.
RBI curbs trigger sharp market moves
Dollar-rupee forward markets have witnessed very sharp moves over recent sessions after the Reserve Bank of India took steps to curb arbitrage and speculative traders in the foreign exchange market.
The central bank’s curbs have prompted an unwinding of arbitrage trades, exposing forward markets to volatility. The 1-year dollar-rupee implied yield, for instance, climbed over 70 basis points on Thursday to 3.67%.
Wide fluctuations in forward premiums
The 1-month forward premium, meanwhile, oscillated between 24 paisa to 39 paisa on Thursday, a considerably wider trading range compared to an average trading session.
Members asked to maintain collateral buffers
The clearing house has asked members to keep their common collateral accounts funded and said the volatility margin would remain in force until further notice.
Following the central bank’s curbs, the rupee rose sharply on Thursday to a peak of 92.8350, up about 2% on the day.