The rupee opens higher against the US dollar on Monday. It appreciated 1.4% to 93.47 at the open against the greenback.
The dollar index, which gauges the strength of US unit against six major currencies, was trading steady at 100.10 as of 9:00 a.m.
This is after the Reserve Bank of India, on Friday, unveiled new restrictions that limit banks' open positions in the onshore foreign‑exchange market to $100 million at the close of each trading day. Set to take effect on April 10, the rule will require lenders to reduce the size of their currency exposures, curbing their ability to take large, one‑sided positions against the rupee.
The move signals growing unease at the central bank over the rupee's weakness, after the currency slipped to repeated record lows in the aftermath of the Iran conflict. With foreign‑exchange reserves falling by more than $30 billion in the first three weeks of March due to heavy spot and forward market interventions, the RBI appears to be pivoting toward stricter, institution‑focused controls to stabilise currency markets.
The currency market will be closed for three days this week, on account of Mahavir Jayanti on March 31, new fiscal year starting on April 1, and Good Friday on April 3.
Pressure on the rupee has intensified since the Iran conflict erupted a month ago, with the currency declining more than 4% over that period and emerging as Asia's weakest performer this year. Ongoing uncertainty around the conflict's duration has driven global investors to withdraw over $11 billion from Indian equities, while index‑linked bond markets recorded record outflows of $1.6 billion in March.
Large offshore positions, beyond the RBI's regulatory reach, can transmit stress back into local markets through arbitrage, compelling the central bank to sell dollars. Such interventions drain foreign‑exchange reserves while doing little to stem the underlying accumulation of speculative bets. By restricting the amount of currency risk banks can hold, authorities aim to slow the buildup of such positions at the source—mirroring measures taken in 2011, when the RBI tightened banks' net open position limits to stabilise the rupee amid similar pressures, as per Bloomberg reports.
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