INR started the week weaker against the US dollar owing to dollar demand from banks and weakness in Indian equities. OPEC’s decision to maintain output aided the rupee to some extent.
The rupee ended at an over 2 year low against the US dollar on Tuesday as importers purchased the dollar persistently through the session. Banks also demanded the dollar noting the weakness in domestic equities, thereby pulling the rupee down further.
Meanwhile, some foreign banks sold the dollar and provided the rupee support. Soft global crude oil prices and comments from credit rating agency Fitch regarding India’s GDP projection propped up rupee. Heavy dollar sales by state-owned banks also supported the rupee.
The Reserve Bank of India issued guidelines for introduction of cross currency futures and exchange traded cross currency option contracts in the currency pairs of Euro (EUR) - US Dollar (USD), Pound Sterling (GBP) - USD and USD - Japanese Yen (JPY). Further, exchange traded option contracts in the currency pairs of EUR - Indian Rupee (INR), GBP - INR and JPY - INR have also been introduced in addition to the existing USD - INR pair. The cross currency contracts shall enable direct hedging of exposures in foreign currencies and facilitate execution of cross-currency strategies by market participants.
Source: ICICI Bank Research, Bloomberg and CRISIL