Mumbai: The relaxation of open position limits announced by the Reserve Bank of India will only have a small impact on the rupee, traders say.
The move is more of a market-making measure aimed at addressing liquidity and deepening markets, dealers add.
Increase of intra-day limits will not help in providing directional bias in rupee and hence should not be seen as a measure to support currency, said traders.
“Most banks do not use more than 50% of available net open positions and intra-day limits currently because of volatility in the currency,” said J. Moses Harding, head of the asset liability committee at IndusInd Bank.
The RBI had already imposed in December restrictions on open position limits to reduce speculative trading in the Indian unit, moves that proved successful.
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