The rupee started the day 18 paise lower at 93.31 against the US dollar on Tuesday, April 21, as traders according to news reports assessed the effects of the central bank’s partial rollback of foreign exchange restrictions, alongside ongoing geopolitical concerns about US-Iran relations.
After market hours on April 20, the Reserve Bank of India (RBI) lifted some previously imposed limitations on banks and corporates. Reuters news report indicated that the central bank rescinded guidelines that had prohibited banks from providing non-deliverable forwards (NDFs) to both resident and non-resident entities, and also lifted restrictions that stopped the rebooking of foreign exchange derivative agreements.
These measures were implemented about three weeks ago to mitigate arbitrage prospects between domestic and international currency markets. In conjunction with previous actions to restrict banks’ onshore position limits, these regulations have aided in the rupee’s rebound from its historic low of 95.21 hit in late March.
(more to come)