The Reserve Bank of India’s recent currency market curbs are temporary, Governor Sanjay Malhotra said. These measures were introduced to quell speculation against the rupee and have helped stabilise the currency after it weakened past 95 per dollar to a record low late March.
The RBI has capped banks’ onshore currency positions at $100 million and barred them from offering non-deliverable forwards. These steps have recovered the rupee more than 2% since the first set of measures were announced on 27 March.
However, the regulatory actions triggered dislocations across markets, with onshore hedging costs climbing to a three-year high and dollar-rupee implied volatility surging to the highest level in four years.
Malhotra allayed concerns that the central bank is moving away from its push to better integrate with global markets. He said the RBI remains committed to the development and internationalisation of the rupee.
