The US dollar/Indian rupee opens sharply lower as traders prepare for a sell-off of the US dollar under stricter foreign exchange position rules.

The US dollar/Indian rupee opened at 93.5875 and closed at 94.8125 last Friday. The Indian central bank instructed banks to limit overnight net open foreign exchange positions to less than 100 million US dollars. Bankers warned that eager unwinding of arbitrage positions could trigger a large sell-off of the US dollar in the onshore market, with no principal delivery forward market buying emerging. The one-month non-deliverable forward points for the US dollar/Indian rupee surged to as high as 100 paise, with traders expecting the onshore forward premium to decline. Nervous traders are worried about the impact of disorderly unwinding. "No one cares about profit today, only about how to limit losses," a trader said when discussing arbitrage positions. Meanwhile, concerns about escalating Middle East conflict have kept oil prices high; Brent crude futures rose 2% to $114.8 per barrel.