Rupee vs Dollar: Indian currency rebounds from record low to 93.5 against US dollar on March 30; check key triggers

Data collected from Investing.com showed that the rupee strengthened to around 93.53 against the US greenback during the early market hours on Monday as the global dollar index was trading lower.

What was RBI’s intervention?

RBI on Friday directed the banks to impose a cap on their net open rupee positions in the foreign exchange (forex) market at the $100 million level by the end of each business day, according to a Reuters report.

According to the directive, the banks are mandated to comply with the latest cap for the rupee position by April 10, 2026. The news report also highlighted that due to the RBI’s cap on ​position limits, the banks are expected to sell US dollars in the domestic forex market.

A CNBC TV-18 report highlighted that usually, the banks are allowed to have a net open position of up to 25% of their tier-1 category capital, and there are no limits on gross positions in the market.

So due to this, the banks have been holding large open positions in the onshore market, with most of them matched by open offshore positions in the non-deliverable forwards market. This means that the banks hedge their currency risk bets to reduce their risk in case of volatility.

With the RBI’s new cap of $100 million of gross open positions, the banks will now have to reduce their hedge matching bets by a significant amount in both the local and foreign markets.

To reduce their hedge matching bets, banks are now selling dollars and buying Indian rupee, in turn strengthening the domestic currency before the RBI’s April 10 deadline.

US dollar move

Bloomberg US dollar spot index data showed that the greenback was down 0.06% to 100.093 as of 12:03 am (EDT) on March 30. The dollar rates were trading lower after an initial green trading session late at night on March 29.

With banks selling US dollars and US President Donald Trump announcing that Iran has allegedly agreed to “most of” the 15-point list of demands put forward by the United States via Pakistan to potentially put an end to the raging conflict.