New Delhi: India's central bank curbed trading in rupee forwards, seeking to temper speculation after Asia's worst-performing currency fell to a record low.
Forward contracts once cancelled cannot be bought again, the Reserve Bank of India said in a statement on its website yesteday. The new rule applies to domestic as well as foreign investors and takes effect immediately. Forwards are agreements to buy or sell assets at a set price and date.
The rupee plunged 16.6 per cent this year and tou ched an all-time low 54.3050 a dollar yesterday, headed for the biggest decline since 2008. Onshore forwards signal the rupee will drop almost 2 per cent from the spot rate in three months, according to data compiled by Bloomberg, indicating derivative traders are betting on a decline past 54.55 a dollar.
"Exporters were booking a forwards contract, cancelling it and then rebooking at a better rate, which was contributing to the free fall" of the rupee, said J. Moses Harding, an executive vice-president at IndusInd Bank in Mumbai.