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To improve risk mitigating environment in the country, the Reserve Bank of India (RBI) has allowed overseas investors to hedge their currency exposure. In its first bi-monthly policy, the central bank, in order to enhance hedging facilities for foreign investors in debt instruments, proposed to allow them to hedge the coupon receipts falling due during the next 12 months. "This is determined by improving the hedging environment for foreign investors in India. It is not necessarily to combat the NDF market but primarily to improve the (hedging) environment in the country," RBI Governor Raghuram Rajan told reporters at the customary post-policy meeting with the media. The central bank also said it is in final discussion with market regulator Securities and Exchange Board of India (Sebi) to finalise the modalities for allowing foreign institutional investors (FIIs) to hedge their currency risk by using exchange traded currency futures in the domestic exchanges. RBI also proposed to allow all resident individuals, firms and companies with actual foreign exchange exposures to book foreign exchange derivative contracts up to $2,50,000 on declaration, subject to certain conditions. "The Reserve Bank will continue to work to ease entry while reducing risk to foreign investors from the volatility of flows," the central bank said in the policy. While answering to media queries, Rajan said RBI's effort is to avoid excess volatility in the forex market and not to achieve a level for the rupee. "I don't think we are trying to establish any level (of rupee) in the market. What we do is try and attempt to keep the exchange rate from becoming overly volatile and it will continue to be our policy," the RBI governor said. He said the central bank has taken into account expansion in foreign currency assets while determining the overall liquidity expansion in the market. "Remember that over the past few years there was very little expansion in the foreign currency assets so most of the expansion came through net domestic assets. Now, I think there will be a more balanced expansion," Rajan said.
Asian stocks, currencies start new week on calmer note
Asian stocks rose and gold hit a near three-month high on Monday, extending a move started late last week when a steep drop in U.S. new home sales tempered expectations the Federal Reserve will soon reduce stimulus. Trading was subdued, particularly in the currency markets, as investors awaited fresh offshore leads amid a lack of market-moving economic news out of Asia. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS climbed 0.7 percent, adding to Friday's 0.8 percent gain. Tokyo's Nikkei .N225 was little changed. Hong Kong's Hang Seng index .HSI advanced 1.0 percent, Australia's S&P/ASX 200 index .AXJO edged up 0.2 percent and South Korea's KOSPI .KS11 put on 0.9 percent. Monday's gains came as a welcome relief after the MSCI index suffered a hefty 2.9 percent drop last week. Much of the heat was felt in the region's emerging markets as investors pulled out of crowded trades in preparation for a post-stimulus world. Last week Indonesian stocks .JKSE posted an 8.7 percent slide in their biggest fall since September 2011. They were up 0.5 percent on Monday. India, Indonesia and Brazil have scrambled to try to stem the destabilizing outflows that have slammed their currencies sharply lower, with the rupee skidding to record lows recently. Global central bankers at the Fed's annual Jackson Hole policy conference were warned that global financial stability is at risk as ultra-easy policies that have flooded the world with cash are slowly unwound. Uncertainty about when and how these policies will be phased out meant that market volatility will likely remain high, analysts said. Data out on Friday showed sales of new U.S. single-family homes fell to their lowest in nine months, raising doubts about whether the Fed can afford to start to pull back next month -- giving investors an excuse to buy back severely beaten-down assets. "We still think the markets are overemphasizing their concerns on (Fed) tapering. Tapering is only likely to be put in place if the U.S. economy is in good shape," said Martin Lakos, division director at Macquarie Private Wealth. While Friday's U.S. housing data is helping stocks and gold to recover for now, it weighed on the dollar. The dollar index .DXY, which tracks the performance of the greenback against a basket of major currencies, was flat at 81.377, having slipped 0.2 percent on Friday. Against the yen, the dollar traded at 98.66 off Friday's peak of 99.15, while the euro bought $1.3381, having climbed as high as $1.3410. Spot gold briefly popped above $1,400 an ounce for the first time since early June, extending Friday's 1.5 percent rally. It last stood at $1,394.51. U.S. crude was bid at $106.96 a barrel, following a 1.3-percent rally late last week, while Shanghai copper rose to its highest in over four months. The London Metal Exchange is closed on Monday for a UK holiday.