Overview
- The rupee strengthened sharply over three sessions, recovering about 1% in one day after Monday's central bank package of measures and reported dollar sales, with spot rates trading in the mid-94s to mid-95s.
- The RBI introduced a special dollar window that lets state oil refiners get dollars through designated banks so their purchases avoid the spot market and reduce immediate dollar demand.
- Regulatory changes include tighter limits on FX derivatives, a 20% cash reserve requirement for specified dollar purchases above $2 million, and a ban on rebooking cancelled rupee derivative contracts.
- Some banks paused forward-rate quotes because rules on cash-margin application were unclear, creating short-term operational frictions in the forward and non-deliverable forward markets.
- Policy makers warn the gains may not stick because large crude import bills and continued foreign portfolio outflows remain primary risks and the RBI says it will act to curb volatility rather than fix a rate.