Rupee futures in demand at DGCX

The Indian rupee has risen strongly against the US Dollar in the past 50 days. (REUTERS)

Open Interests (OIs) in the Indian rupee dollar futures contract (DINR) has jumped manifold at the Dubai Gold and Commodities Exchange (DGCX) this month.

The number of OIs in DINR futures contract for the first two weeks in April stands at an average of 1200 lots – more than double the last month's average. The OI numbers of the DINR contract stand next only to those of the DGCX gold futures contract (DG).

On April 1, the number of OIs in DINR stood at 1270 and at 1250 on April 5. It stood at 1261 on April 8 and at 1292 on April 9. The average number of OIs in DINR in March stood at about 500 for most of the month.

OI, also known as open contracts or open commitments, refers to the total number of derivative contracts, that have not been settled in the immediately previous time period for a specific underlying security. The Indian rupee has risen strongly against the US Dollar in the past 50 days and there are expectations of it rising further. Yesterday 44.49 Indian rupees equaled one US dollar, the value having risen against the previous day's close. According to Rajni Panicker, an analyst at MF Global, the DINR key support is seen near 44.00 with resistance seen near 44.30 and 44.80.

Traders take an OI position in a contract having foreseen volatility in the markets. The OI position is 'squared off' by the exchange incase the trader does not 'roll it over' on the day the contract expires.

High number of OI positions in general exhibit a confidence among traders that the contract value will go higher. "The OI positions do indicate the health of the contract," an analyst observing DGCX volumes said. Those dealing at the DGCX said the DINR contract is being propelled by the strong Indian trading community in the UAE.

"Since every contract is valued at Rs2 million (Dh165,000), not many retail investors are expected to be involved in the contract. You have the larger firms and institutions involved in the contract. Firms trading in India and having to make payments in rupees also make use of the contract," said Sajith Kumar PK, the CEO of Dubai-based JRG International DMCC.

DGCX offers the only Indian rupee futures contract outside of India and the contract is cash settled against the US dollar reference rate published by the Reserve Bank of India in Mumbai.

As far as the volumes is concerned, the DGCX recorded 1,074 contracts valued at $47.37m (Dh174m) on March 26 – the highest volume achieved since the contract was launched in 2007.