Rupee's Fall May Slow, But Volatility Could Rise Amid RBI Directive & Oil Surge

• RBI's new directive caps banks' net open rupee positions at $100 million by April 10, aiming to arrest the rupee's slide.
• The move is expected to trigger unwinding of $10-18 billion in arbitrage trades, potentially leading to dollar selling and rupee support.
• However, rising Brent crude prices (up 50% in four weeks to $116/barrel) counter rupee support, increasing dollar demand for India.
• The rupee declined 1% last week, hitting a record low of 94.84 per dollar, and is down 4.2% this month.
• Indian government bonds saw their worst week in nearly four years, with the 10-year yield rising 20 basis points to 6.94%.