Venues Forced to Increase Margin Requirements on Erratic Rupee Moves

With on-going concerns about the shape of the Indian rupee, the Dubai Gold and Commodities Exchange (DGCX) and US based ADM Investor Services have increased their margin requirements for the rupee contract. The Dubai based exchange has increased its margin requirements on the INR USD futures contract. Forex Magnates has learned from an email to clients that ADM Investor Services International Limited (ADM), a multi asset brokerage firm that offers trading in the NDF USD INR contract, has also increased its margin requirements.

ADM have increased their margin requirements for a second time this week, on Tuesday the firm increased its margin from 4% to 6%. In a response to the DGCX’s increase, the broker has further increased margin requirements to 8%. CME, a leading derivatives bourse that offered the rupee futures contract has not made any changes to its margin requirements, Forex Magnates confirmed with their trading team in a phone call.

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The Indian rupee has been hitting record lows against the greenback after Asia’s third largest economy is reaching tough ground. The country’s central bank has been exercising measures to maintain stability and reduce volatility with various incentives, from issuing a new food bill (to manage food inflation) to selling dollars to domestic oil firms in an attempt to reduce their demand for foreign currency to fund oil imports.

India’s Prime Minster, Manmohan Singh spoke about the current situation in a speech in parliament: “It cannot be denied that the country is faced with a difficult economic situation.”

The deepening geo-political situation in the Middle East is having a knock-on effect on India’s foreign investment. Peter Rosenstreich, Head of Market Strategy at Swissquote Bank said in a statement to Forex Magnates: “Fears over a growing conflict in Syria has made traders risk averse and flee to safe havens, this only amplifying India’s problems to retain capital.”

ADM explained to its clients in the email that: “We are constantly monitoring the various international markets we cover and work hard for the sake of our customers to provide the best cost-effective margining for all their market operations. You can be sure that as the situation changes we will  review margin rates again so that we can offer the best possible to all our customers.”