RBI allows three more cross currency pairs to be traded in derivatives market

MUMBAI: Corporates and well-heeled investors will now have more leeway to hedge their offshore currency exposures as the Reserve Bank of India has allowed three more cross currency pairs, to be traded in the exchange traded derivatives market including futures and options.

Currently four currency pairs are traded in futures market viz. rupee-dollar, rupee-pound, rupee-yen, and rupee-euro. Of which rupee-dollar was only allowed in options market in domestic stock exchanges like NSE and BSE.

“It has been decided to permit the recognized stock exchanges to offer cross-currency futures contracts and exchange traded option contracts in the currency pairs of EUR-$(euro-dollar), GBP-$(pound-dollar) and USD-JPY (dollar-yen),” RBI said in a notification.

“ Recognised stock exchanges are also permitted to offer exchange traded currency option contracts in EUR-INR, GBP-INR and JPY-INR in addition to the existing USD-INR option contract, with immediate effect.”

Companies from information technology and manufacturing space are most likely to benefit from this addition as they have growing business associations in Europe, Japan, and UK, dealers said.

With the new guidelines the currency kitty has expanded including new pairs, which in turn, will help increase participation in domestic stock exchanges.
The central bank announced plans for such inclusion earlier in September monetary policy.

Foreign investors too can take bet on these.

Moreover, talks are going on to extend timing of futures and options trading to align with other global markets like Singapore, Hong Kong, Europe.