The Reserve Bank of India’s (RBI) recent easing of restrictions in the offshore non-deliverable forwards (NDF) market is not expected to alter its stance on the net open position for the Indian rupee (NOP-INR). Market participants cite ongoing geopolitical uncertainties and high Brent crude prices as factors that will likely persist.
On April 20, the RBI announced the withdrawal of some restrictions on forex dealers in the offshore NDF market, allowing them to offer non-deliverable derivative contracts involving the rupee. However, the RBI has maintained limits on net open positions for the rupee to prevent excessive volatility.
Kunal Sodhani, head of treasury at Shinhan Bank, noted that retaining NOP limits helps avoid arbitrage-driven trades that could increase volatility. The geopolitical tensions between the US and Iran continue, with Brent crude prices remaining close to $100 per barrel.
As of April 21, the rupee was trading at Rs 93.41 to the dollar, recovering nearly 2 percent from a previous low of Rs 95.21 per dollar. Traders warn that increased hedging freedom may raise dollar demand, adding pressure on the rupee.
