Dollar vs Rupees: The Reserve Bank's tightening of its stance is now showing its impact on the rupee. After gaining 1.8% last week, the rupee is now again gaining ground against the dollar.

Rupee strengthens against the dollar.

Dollar vs Rupee: The Indian rupee's decline against the dollar appears to be pausing. On Monday, April 6, the rupee reached 93 against the US dollar. Today, the rupee is seeing a significant recovery from Thursday's (April 2) closing price of 93.10. The rupee's gains have continued over the past week, driven by the Reserve Bank of India's (RBI) stringent measures. Last week, the rupee gained 1.8%, its biggest weekly gain in more than four years.

RBI's strictness showed its effect

The rupee is strengthening due to the Reserve Bank of India's new currency directive, which has completely changed the dynamics of the forex market. The Reserve Bank has imposed strict restrictions to prevent speculation in the foreign exchange market. Under this, a limit of $100 million has been set on net open positions in forex trades. Previously, traders and corporations often placed large bets on the rupee's decline, which would have caused the rupee to fall even faster. However, now, with the $100 million limit, bearish bets can be placed within the prescribed limits.

The rupee's weakness and betting on future dollar demand had fueled dollar demand in the market. However, the Reserve Bank of India has now eliminated this position limit. Traders and banks holding more dollars than this have begun selling them due to the RBI's strict limit. Fewer buyers and an excess supply have reduced dollar demand, strengthening the rupee.

$30 billion pressure

Citing market experts, Bloomberg reported that Indian and foreign banks (offshore banks) held $30 billion in open positions for speculative or arbitrage trades. These positions are being unwound due to the inability to bet on the rupee's decline. As these positions are being closed, dollar selling is increasing, providing support to the rupee.