Rupee’s Exchanging Volume Plunges On National Bank’s Intercession

Rupee’s Exchanging Volume Plunges On National Bank’s Intercession

Trading volumes and speculative interest in the Rupee have sharply declined in recent months as the central bank, the Reserve Bank of India (RBI), maintains a tight grip on the currency’s movement.

This approach has left traders uncertain about the rupee’s future trajectory, resulting in reduced trading activity.

The open interest on USD/INR currency futures on the National Stock Exchange (NSE) has seen a significant drop of over 40 per cent, falling from this year’s peak of nearly $8 billion in January to $4.6 billion. This decline comes in contrast to October 2022, when the rupee had plunged to a historic low and open interest had soared to $8.8 billion.

Rupee dips to 82.81 against Dollar as equities slide and crude surges

Presently, the Indian rupee stands at 82.80 against the dollar as of 1:30 pm on Wednesday. Since February, the currency has been tightly bound within a less-than-2 per cent range, oscillating between 81.50 and 83.00, largely due to the active intervention of the Reserve Bank of India.

Rupee edges 0.1% lower at 82.82 against stronger US Dollar

Average daily volumes plunged by 30 per cent

The central bank has reportedly stepped in whenever the USD/INR exchange rate has approached either end of this constrained range, influencing the rupee’s movement and leaving traders hesitant to make bold predictions due to the limited volatility.

“The size of the position is mainly a function of the conviction on the outlook. And that is missing currently,” said Nitin Agarwal, India head of trading at ANZ.

RBI broadens access to vostro accounts to facilitate rupee trade

Average daily volumes in the currency derivatives segment of the NSE have plunged by over 30 per cent in comparison to levels seen in January. As the NSE holds a substantial share of the rupee derivatives trading market, this decline signifies the reduced interest in trading rupee-related derivatives.

Rupee strengthens by 10 paise to 82.81 against US dollar

“With the USD/INR contained to a narrow range, people are not taking large short or long bets. The proprietary activity of banks on the currency side has reduced,” said Ashutosh Tikekar, head of global markets at BNP Paribas India.

Trading volumes between banks in the over-the-counter segment have also experienced a substantial drop, paralleling the trend observed on the NSE. The average daily volume on the interbank order matching system stands at $4.5 billion for the current month, in contrast to the $6.9 billion recorded in January.

The constrained trading range has led to smaller stop-losses and take-profits, impacting both short-term and longer-term trading strategies. Overall, the lack of directional clarity, along with the reduced volatility, has dampened trading enthusiasm and speculative activities among traders in the Indian rupee market.

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