RBI Tightens FX Limits as Oil Prices Pressure Rupee
The RBI tightened FX limits for banks as the rupee hit a record low of 94.84. Rising oil prices near $116 per barrel are also pressuring government bonds.
Traders in India are preparing for a period of heightened volatility following the central bank's decision to tighten limits on net open foreign exchange positions. This regulatory shift, combined with a significant rally in Brent Crude Oil, is expected to maintain pressure on both the currency and government debt markets. The USD/INR pair saw the rupee decline by approximately 1% last week, marking its fourth consecutive weekly drop and reaching a record low of 94.84.
The Reserve Bank of India recently announced that lenders must ensure their net open rupee positions in the onshore deliverable market do not exceed $100 million by April 10. Market analysts suggest this short timeframe could trigger a disorderly unwinding of positions and potential losses on arbitrage trades.
