Economic Times- Foreign institutional investors (FIIs) and hedge funds will now have an alternate route to bet on the rising rupee. The Dubai Gold and Commodities Exchange (DGCX) will be launchingfutures contracts on the rupee. Each contract, which covers up to Rs 20 lakh, will be subject to a minimum price fluctuation of $2 per contract.
Until now, offshore entities could hedge their rupee exposures only in the non-deliverable forward market. Non-deliverable forwards are instruments that enable trading of an exotic currency at afuture date without having to settle in the exotic currency.
The Indian rupee has risen by more than 13% against the dollar, in less than an year’s span. The local currency, which currently trades at around 40.50 against the dollar, was hovering above the47-mark in July last year. The rupee has outperformed most Asian currencies over the last few months.
Future contracts are used as a shield against exchange rate risks. Within India, this product would be available for both importers and exporters, who wish to guard themselves from a volatile rupee.If Indian laws permit, even local residents could use this tool to bet on the rising rupee.
