Traders in the currency futures market heavily depend upon the fluctuation of Indian rupee against the other foreign currencies, however, with the Reserve Bank of India's (RBI) decision to intervene in the currency futures, its excessive movement is expected to come under control.
Governor Raghuram Rajan announced last month that the central bank would also trade in the currency derivatives market to "manage excessive volatility and to maintain orderly conditions......" The industry experts are of the opinion that while the RBI’s move may help in regulating the market fluctuations, on the other hand, it would deprive arbitrageurs from benefiting from differential rates in different markets.
Indeed, in its December bulletin, the banking regulator revealed its purchase and sale of $355 million in the currency futures market in September. Currently an exchange member had exposure limit of 15 per cent of market wide open interest. Currency derivatives trading since August 2008 on NSE, has grown with annual/daily trading volume averaging Rs 16,915 crores in FY16 (April-January period), from just Rs 1,167 crores in FY09.
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