The Reserve Bank of India's decision to remove restrictions on open position limits for rupee currency pairs should improve liquidity in foreign exchange markets, traders said on Monday.
The removal of restrictions by the central bank late on Friday means traders can carry over their positions on rupee pairs from day to day.
The RBI had reduced the net overnight open position limit for the rupee in late 2011, when the currency was slumping, to cut down on speculative trading. That had forced traders to square their trades at the end of each session.
"The move is positive but does not have any directional impact. It will help improve liquidity and reduce intra-day volatility in the market," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.