FPIs allowed entry in exchange traded currency derivatives for hedging currency risk

An FPI cannot take a short position beyond $10 million on a single exchange

The Reserve Bank of India (RBI) on Friday, 20 June 2014, issued guidelines allowing foreign portfolio investors (FPIs) exposure in the exchange traded currency derivatives (ETCD) market. FPIs will be allowed access to the currency futures or exchange traded currency options for the purpose of hedging the currency risk arising out of the market value of their exposure to Indian debt and equity securities.

FPIs can take position -- both long (bought) as well as short (sold) in foreign currency up to $10 million or equivalent per exchange without having to establish existence of any underlying exposure. The limit will be both day-end as well as intra-day. An FPI cannot take a short position beyond $10 million at any time. For taking a long position beyond $10 million in any exchange, the concerned FPI will be required to have an underlying exposure on Indian debt and/or equity securities.

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