The Indian rupee strengthened significantly on April 2, opening 1.3% higher at 93.53 against the US dollar, following decisive action by the Reserve Bank of India (RBI) to curb speculative trading in the foreign exchange market.
The RBI introduced new directives restricting banks from offering rupee non-deliverable forwards (NDFs) to clients and barred companies from rebooking cancelled forex derivative contracts. These measures are aimed at reducing volatility and limiting arbitrage opportunities that had weakened the currency in recent weeks.
As a result, traders were forced to unwind large dollar positions, increasing dollar supply in the domestic market and boosting the rupee. Market participants noted that the move led to a sharp reversal in sentiment, with the currency recording one of its strongest single-day gains in years.
The rupee had been under pressure recently, even breaching the 95-per-dollar mark, due to factors such as high crude oil prices, foreign capital outflows, and global geopolitical tensions.
It is believed the RBI’s shift toward regulatory intervention, rather than heavy use of forex reserves, has helped stabilise the currency in the short term. However, they caution that sustained gains will depend on broader economic factors, including capital inflows and global market conditions.
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