The Reserve Bank of India on August 1 tightened hedging rules for foreign institutional investors in the currency market, requiring investors who have issued so-called participatory note contracts, or P-notes, to gain approval from the note-holder before hedging. The order was the latest in a series of measures intended to shore up a battered rupee and helped push the currency higher to 60.48 per dollar. The rupee, which has been the worst performing currency in emerging Asia so far in 2013, is hovering near a record-low of 61.21 to the dollar touched on July 8.
The central bank’s order on P-notes was seen to be a further curb against speculation, by ensuring all P-note related derivative trades are done for genuine customer needs, traders said. The RBI was also suspected to have sold dollars on Wednesday, helping pull back the currency from the day’s lows.
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