Rupee relief comes with disruptions in financial markets

What happened: The rupee is set for a 1.9% weekly advance, its biggest weekly gain in four years, while liquidity in parts of the foreign-exchange market dries up after RBI restrictions raised the cost of using derivatives. Key numbers: 1.9% weekly rupee gain, biggest in four years. Hedging costs at a decade high. Why it matters: RBL Bank's Anshul Chandak said hedging costs and illiquid markets are unintended consequences. UBS's Shamaila Khan said higher hedging costs will raise the returns UBS demands from Indian assets, though its strategic view of India is unchanged.

The rupee is set for a 1.9% weekly advance, its biggest weekly gain in four years, while liquidity in parts of the foreign-exchange market dries up after RBI restrictions raised the cost of using derivatives.

RBL Bank's Anshul Chandak said hedging costs and illiquid markets are unintended consequences. UBS's Shamaila Khan said higher hedging costs will raise the returns UBS demands from Indian assets, though its strategic view of India is unchanged.