The central bank, on October 10, announced a series of restrictions on forex derivatives contracts
RBI’s weekend measures to curb speculation and contain volatility in the forex market had the desired effect, with the rupee appreciating about 1 per cent, even as yields of government securities (G-Secs) jumped on expectations that the RBI may quicken rate hikes on inflation worries.
The Indian currency (INR) opened 97 paise stronger at 95.76 per US dollar (USD) against the previous close of 96.73. However, it closed almost flat at 95.77, erasing two weeks of losses.
The last time the INR had a better opening than today’s was on February 3, 2026, when it opened 111 paise stronger at 90.40 per USD against previous close of 91.51.
Targeted measures
The central bank, on October 10, announced a series of restrictions on forex derivatives contracts and opened a special window to meet the daily dollar requirement of three public sector oil marketing companies in view of the evolving market conditions and the need to ensure orderly functioning of the forex market.
RBI announced restrictions on rebooking of cancelled foreign exchange derivative contracts; reduced the threshold for undertaking foreign exchange derivative transactions without establishing underlying exposure from $100 million to $5 million; introduced foreign exchange risk reserve (FERR) for banks; and prescribed additional documentation for verification of underlying exposures.
The RBI alsoopened a special window to meet the entire daily dollar requirements of three public sector oil marketing companies (OMCs) — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.
V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, said such measures are intended to be temporary to curb currency volatility, ease market panic and quell one-sided expectations. They will ensure that the currency would not breach the 97-per-dollar level in the near term.
Madan Sabnavis, Chief Economist, Bank of Baroda, noted that if the current USD/INR level remains steady, then it can be surmised that the speculative forces had a role to play in the rupee decline.
Dilip Parmar, Senior Research Analyst, HDFC Securities, said the Indian rupee emerged as the strongest performer among the Asian peers, supported by the RBI’s targeted measures to curb speculation and contain volatility in the forex market.
“A pullback in crude oil prices, driven by expectations of improving supply conditions, further aided sentiment. However, gains were limited after the higher open as weaker domestic equities and continued foreign fund outflows weighed on the currency,” he said.
In the near term, spot USD/INR may drift towards the 95.30 levels, though the broader medium-to-long-term trend will hinge on dollar flows, the trade balance, interest rate differentials, and evolving geopolitical developments, per Parmar’s assessment.
Meanwhile, (G-Secs) yields jumped on fears that RBI may further up interest rates, including via an off-cycle meeting, and conduct open market operation sales of G-Secs.
Yield of the 10-year benchmark jumped about eight basis points to close at 7.3850 per cent against the previous close of 7.30 per cent. The last time the 10-year G-Sec was around these levels (7.39 per cent) was in October 2023.
Published on October 12, 2026
