Rupee relief, higher hedging costs: What RBI’s new forex rules mean

NEW DELHI: The Reserve Bank of India's (RBI) latest measures to curb volatility in the rupee could ease near-term depreciation pressure, reduce speculative dollar demand and help withdraw surplus liquidity from the banking system, according to research reports cited by news agency PTI.The measures, announced through circulars on October 10, include tighter restrictions on certain foreign exchange derivative transactions and a new reserve requirement for banks handling rupee-linked currency contracts.They are expected to make some hedging transactions more expensive, potentially reducing demand for dollars in the spot market and easing forward premiums.Kotak Mahindra Bank said the immediate impact on the rupee could be favourable, although it cautioned that the global environment remained uncertain."The immediate reaction on INR is expected to be very favourable-likely move of USDINR towards sub-95 cannot be ruled out.