India Forex Regulator Criticizes Banks’ Rupee Arbitrage Trades

A senior Reserve Bank of India official criticized foreign-exchange market makers for their role in aggravating the rupee’s weakness during the Middle East tensions, as the regulator keeps up its tough messaging stance in its defense of the currency.

Addressing an annual foreign exchange dealers’ conference in Paris at the weekend, Deputy Governor T. Rabi Sankar said the arbitrage between local and offshore markets strained dollar liquidity at a time when the rupee was under pressure due to large foreign outflows, according to people familiar with the matter. They asked not to be identified as they are not authorized to speak to the media.