Foreign funds, non-residents may be able to trade in currency futures
FIIs and non-resident Indians may be able to participate in the currency futures market in three-four months. The move that would provide the much-needed depth to the currency futures market in the country has been in-principally approved by the policymakers, a government official familiar with the development said. However, it has been decided that this should be allowed after few months after measures like higher exposure limits begin to have impact in form of increasing volumes.
Currency future allows companies and others to hedge their risk against any fluctuations in the exchange rates and is a contract to exchange one currency for another at a specified date in the future at a specified price (exchange rate) that is fixed on the purchase date.
Market regulator Sebi had on March 25 doubled the gross outstanding limit for small traders to $10 million and $50 million for brokers. Exchanges may also introduce future contracts in currencies other than dollar, if they find demand building up for such contracts. Presently, only $-INR contracts are available on the exchanges and there is not much demand for contracts in other currencies such as INR-Euro or INR-Yen.
A SEBI-RBI technical committee that takes key policy decisions on the currency futures has already given its nod for the such contracts.
