The Indian rupee opened higher on Monday, October 12, after the Reserve Bank of India (RBI) announced fresh measures to curb volatility. However, analysts have cautioned that the measures are a “stop-gap” solution, arguing that a broader policy toolkit is needed to stabilise the currency.
The rupee climbed to 95.76 per dollar, rising around 1 percent compared to Friday’s close of 96.73.
On Friday, the central bank announced a series of measures on the foreign exchange and liquidity fronts. The moves are an attempt to curb the depreciation of the rupee, which signals lower tolerance for rupee weakness, along with a desire to tighten liquidity.
Market participants will not be permitted to rebook any cancelled INR derivative contracts. Further, the unhedged transaction threshold has been reduced to $5 million from the earlier threshold of $100 million. Additional documentation will also be required to ensure that the exposure has not been hedged with other dealers.
The Reserve Bank created a special window for dollars for oil marketing companies (OMCs), which should shift between $11-12 billion away from the spot markets per month, according to Emkay's analysis.