OCBC strategists Sim Moh Siong and Christopher Wong highlight that USD/INR has dropped sharply as RBI’s targeted regulatory measures curbed speculative positioning and tightened market microstructure. Stricter limits on net open FX positions and restrictions on INR NDFs have constrained USD long building. With bullish momentum fading, they see consolidation now but more downside in USD/INR if Iran tensions de-escalate.

Regulation-driven drop with de-escalation kicker

"USDINR has traded sharply lower the past few sessions, owing to RBI’s targeted regulatory measures at curbing speculative positioning and tightening market microstructure."

"The measures include stricter limits on net open FX positions in INR at USD100mn, effective 10 April."

"This effectively forces banks to scale back long USD (short INR) positions, in turn providing support for INR."

"Taken together, these measures effectively constrained the market’s ability to build USD long positions, in turn compressing speculative demand and forcing a rebalancing of positioning."

"There could be more room for USD/INR to fall should geopolitical de-escalation in Iran comes into sight."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)