The Reserve Bank of India on Thursday allowed exchanges to offer cross currency futures contracts and exchange-traded currency options in three more currency pairs.

Further, it allowed the entry of foreign portfolio investors (FPIs) into the exchange-traded currency F&O segments — both rupee and cross currency.

The RBI allowed exchanges to offer cross currency futures contracts and exchange-traded currency options in the pairs of EUR-USD, GBP-USD and USD-JPY with immediate effect. This will enable direct hedging of foreign currency exposures in foreign currencies and facilitate execution of cross-currency strategies by market participants, it said.

The RBI has also allowed introduction of exchange-traded currency options contracts in EUR-INR, GBP-INR and JPY-INR pairs.

Currently, futures trading in USD-INR, EUR-INR, GBP-INR and JPY-INR besides options trading in USD-INR is allowed only for resident Indians and eligible NRIs.

The RBI said all market participants have been allowed to take positions in exchange-traded currency F&O segments — both rupee and cross currency — without having an underlying exposure. This would, however, be subject to position limits imposed by exchanges, RBI said.

Existing position limits of $15 million for USD-INR contracts and $5 million for non-USD-INR contracts, all put together, per exchange, for residents and FPIs, without having to establish underlying exposure, shall remain unchanged and so shall the hedging procedure. Banks which are Category–I authorised dealers in foreign exchange have been allowed to take positions in the exchange-traded market within the net open position limits stipulated by exchanges.

The RBI added that a USD-INR position created due to a combination of foreign currency-INR and a cross currency contract shall be considered within the position limit of USD-INR as prescribed by the exchange.

Related Topics
comment COMMENT NOW