Rupee rebounds as regulators curb speculative trading

MUMBAI: The Indian rupee rallied yesterday 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 trade.
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 regulators.
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 account deficit.
"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.