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* USD/INR ends at 60.14/15 vs 60.61/62 pvs close
* Bonds rally on hopes rupee will stabilise for now
* Regulators curb speculative trading; clarifies later
By Swati Bhat and Subhadip Sircar
MUMBAI, July 9 The Indian rupee rallied on
Tuesday from a record low in the previous session after
regulators restricted speculative trading in currency
derivatives, although the measures are expected to provide only
brief respite for the currency.
Late on Monday, the Reserve Bank of India banned banks from
proprietary trading in domestic currency futures and options,
while the Securities and Exchange Board of India (SEBI) doubled
the margin requirement on the domestic dollar-rupee forward
The National Stock Exchange later clarified that clients with
excess open positions in currency derivatives will have until
July 30 to cut them to levels mandated by
The steps are the latest by regulators to curb speculative
trading, which would pare short positions in the rupee, after
some bankers said they had been discreetly asked last month by
the RBI to trim intraday open positions.
However, the rupee is expected to remain vulnerable unless
regulators take stronger measures, as the currency's weak
position is seen as a symptom of India's record high current
"There will be some impact on the rupee, but not likely to
be massive as this does not change the structural weakness of
the Indian external balances," said Nizam Idris, head strategist
for currency and fixed income at Macquarie Group.
The rupee ended at 60.14/15 to the dollar, after
rising to as high as 59.60 in early trade, and above the record
low of 61.21 hit on Monday.
The rupee closed at 60.61/62 in the previous session.
The gains were driven by large unwinding of long-dollar
trades in futures and spot markets, dealers said.
"The RBI would like to shift a part of the futures trading
to the over-the-counter segment where it has better regulatory
control. This move may be to instill discipline in the
inter-bank forex trading segment," said M. Natarajan, treasurer
at Scotia Bank.
In the currency futures market, the most-traded
near-month dollar/rupee contracts were down around 0.8 percent
in all three exchanges. Volumes remained high at $5.9 billion.
The rupee rebound had a knock-down effect on the domestic
debt market as well. The benchmark 10-year bond yield
ended down 2 basis points at 7.55 percent, after
falling as much as 8 bps in early trade.
Separately, the central bank on Monday made it easier for
non-bank asset finance companies to raise money abroad, which
could help attract dollars in the medium term, dealers said.
Analysts said the RBI would likely resort to other
administrative steps in the near-term, most likely the provision
of a special window to provide dollars to oil companies, the
biggest buyers of greenbacks in domestic markets.
In other measures, the government is taking steps to attract
foreign direct investment and could review limits in sectors or
issue a sovereign bond to non-resident Indians.
Finance minister P. Chidambaram is in the United States this
week to drum up investment. He is seen, however, as struggling
to push through proposals to relax rules on foreign direct
investment in defence, telecoms, pharmaceuticals and retail.
The 5-year overnight indexed swap ended down
3 bps at 7.57 pct, while the 1-year rate ended 1
bp lower at 7.54 percent.
(Editing Shri Navaratnam and Ron Popeski)