India Forex Regulator Criticizes Banks’ Rupee Arbitrage Trades
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A senior Reserve Bank of India official criticized banks for exacerbating the rupee's weakness amid Middle East tensions. At a foreign exchange conference in Paris, the Deputy Governor highlighted how arbitrage between local and offshore markets strained dollar liquidity during significant foreign outflows. The RBI recently imposed restrictions on banks' speculative currency bets, forcing them to reverse $30 billion in arbitrage trades. The RBI's measures aim to stabilize the rupee, which has gained about 2% since the clampdown, becoming Asia's best-performing currency this year.
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