Rupee posts biggest single-day gain in 12 years as RBI tightens speculation curbs

Indian rupee surged 1.7%, its biggest gain in over 12 years, after Reserve Bank of India tightened curbs on currency speculation and offshore derivatives. Gains came amid global market weakness, rising crude prices, and falling Asian equities and domestic indices

New Delhi: The Indian rupee posted its biggest single-day gain in more than 12 years on Thursday as authorities intensified their crackdown on currency speculation by extending curbs to offshore derivatives markets, days after tightening limits on banks’ local positions.

The currency strengthened as much as 1.7 per cent to 93.25 against the dollar — its sharpest rise since September 2013 — as trading resumed after a three-day holiday break. The rally came despite broad weakness across most regional currencies, as US President Donald Trump signalled a further escalation of tensions in West Asia.

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On the commodities front, global crude prices surged. Brent crude futures traded at $106.47 per barrel, up 5.24 per cent, while US WTI futures rose 4.5 per cent to $104.64.

Asian stock markets also came under pressure, with major indices trading in negative territory. The Nikkei, Hang Seng, and KOSPI fell up to 3 per cent. Domestic markets opened lower, with headline indices Sensex and Nifty falling up to 2 per cent in early trade.

The currency markets had remained closed since Monday, on account of Mahavir Jayanti on March 31, the start of the new fiscal year on April 1, and will shut on Good Friday on April 3.

The Reserve Bank of India has barred banks from offering rupee non-deliverable forwards to resident and non-resident clients. The central bank also said companies cannot rebook cancelled forward contracts.

Earlier in the week, the central bank also put a limit of $100 million on net open rupee positions of banks. It also prohibited banks from undertaking FX derivative contracts with related parties.

Moreover, India’s foreign exchange reserves of over $700 billion are large enough to deter speculative moves and allow the RBI to intervene to stabilise the rupee, a report said.