Recreating the best recovery in 13 years, but volatility continues – The

However, with a new round of US bombings in Iran after market hours, sending global oil prices higher, traders are wary of a new wave of volatility when the forex markets open next week.Thursday’s rebound followed a series of regulatory steps aimed at squeezing short positions and arbitrage trades. The central bank banned non-deliverable futures contracts abroad, restricted the rebooking of canceled foreign exchange contracts, and capped banks’ foreign exchange positions at $100 million, leading to massive dollar sales in the local market.These measures raised the value of the currency while widening the gap between internal and external markets, and pushing up hedging costs. The Reserve Bank of India had taken similar measures in 2013 to stabilize the currency after a sharp decline.The rupee was under pressure from rising oil prices due to conflict in West Asia and global risk aversion, which led to a widening of the current account gap. The currency has fallen more than 4% since February 28 before recovering, and about 10% in fiscal 2026, making it among the weakest in the region.

The rupee had breached the 95 level earlier in the week and closed at 94.70 before hitting a low of 94.84. Markets are closed on April 3 due to the public holiday of Good Friday.The non-deliverable futures market, which operates with both parties placing foreign currency bets on the direction of the rupee’s movement, has emerged to be larger than the spot market, traders said. With many players betting on a weaker rupee in offshore markets, banks were able to arbitrage by buying dollars in the onshore market and selling them abroad.

These deals increased pressure on the rupee.The restrictions imposed by the Reserve Bank of India (RBI) have reduced market liquidity, widened bid-ask spreads, and fragmented trading across sectors. The repercussions of the restrictions would lead to lower interest rates on Indian bonds and higher hedging costs.

Traders said the rupee will continue to receive support as banks unwind their open positions on the dollar ahead of the April 10 deadline, with the currency seen trading in a range of around 92.20-93.20.