Rupee hammered on Day 1 of futures trading on NSE

Mumbai: The rupee touched a low of 45 against the US dollar as the finance minister launched the country's first exchange traded currency futures on the National Stock Exchange today.

Among the first of the deals struck, Standard Chartered Bank bought 500 1-year contracts at 45 per dollar while information technology exporter Infosys Technologies sold 100 contracts for September at 43.8375 through ICICI Bank. 

Over 5,000 contracts were traded in the opening minutes, with the opening trade at Rs44.1500 to a dollar.

Large companies and banks accounted for bulk of the trading although contract sizes were low.

Near month contracts traded most although interest was low. Nearly 26,000 contracts were traded by noon with the September and October contracts most active.

In the spot market, however, the rupee was trading at 43.79/80 per dollar,  little changed from the previous day's rate.

Launching the futures trading, finance minister Chidambaram said the country is trying to develop more sophisticated financial markets and hedging tools to support its rapidly growing economy, and is planning to introduce new such instruments.

''We need to revitalise exchange-traded interest rate derivatives markets, offer exchange-traded credit derivatives and also need to strengthen the corporate bond markets,'' he said, adding, ''These three products are high on the priority list of the government, and I ask the government to move forward on this."

Daily currency trading volume on the spot and futures market together was  around $48 billion in 2007-08, according to Reserve Bank of India estimates.

''The introduction of currency futures, I am sure, will provide further depth and breadth to the market and fulfil their intended objective as an effective risk management instrument,'' Reserve Bank of India deputy governor Shyamala Gopinath said.

The trading limit for individuals is between $1,000 and $5 million and for trading members it is a maximum of $25 million.

Foreign institutional investors are currently excluded from the market, but finance minister Chidambaram indicated that it is likely to be opened up for foreign institutional investors and non resident Indians as well.

NSE has now over 300 traders and 11 banks registered as members for participating in the currency futures segment.

The Multi Commodity Exchange of India and the Bombay Stock Exchange have also received in-principle approval to offer exchange-traded currency futures.

BSE is planning to team up with an established foreign-exchange company to increase its reach in the segment.