Definition
Currency Futures on NSE
Currency futures on the NSE are standardised, exchange-traded contracts to buy or sell a fixed amount of foreign currency against the rupee on a future date.
The NSE offers futures on USDINR, EURINR, GBPINR and JPYINR. Each USDINR contract has a lot size of 1,000 units (one dollar each), with prices in rupees per dollar and monthly expiries on the last working day, settled in cash.
These contracts let importers, exporters and traders hedge or speculate on the rupee with low margins and exchange clearing-corporation backing. SEBI requires participants with positions beyond set limits to have underlying exposure, curbing pure speculation in exchange-traded currency derivatives.
Related terms
- Base Currency vs Quote CurrencyIn a currency pair, the base currency is the first one and is priced in units of the second, the quote currency; the rate shows how much quote currency one unit of base currency buys.
- USDINRUSDINR is the exchange rate of the US dollar against the Indian rupee, the most-watched currency pair in India and a key barometer of capital flows and import costs.
- Currency Options on NSECurrency options on the NSE give the right, not obligation, to buy (call) or sell (put) a foreign currency against the rupee at a set strike, primarily on USDINR.
- Hedging Forex RiskHedging forex risk means using forwards, futures, options or swaps to lock in or limit the exchange-rate cost of future foreign-currency cash flows.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.