USD-Rupee Futures in IndiaThe long and impatient wait of traders, derivatives experts and many others is over; NSE started trading Rupee Futures on its platform from Friday, August 29, 2008. Last November, an internal working group of the Reserve Bank of India (RBI) recommended the introduction of these contracts to term. This milestone marks the introduction of the world's most traded derivative instrument in India. This was the first of two planned steps by SEBI towards the introduction of derivative instruments in India. Interest rate derivatives have been approved and are expected to be traded on Indian stock exchanges soon. This article is a check on the relevance of the instrument in India. exchange rate) fixed on the date of purchase. Currency futures are typically traded in "pairs", for example USD/EUR or USD/YEN. A combination of currency futures can be used to operate in non-standard pairs. Pricing The price of a currency futures contract is entirely determined by the prevailing spot rate and interest rates. Alternatively, investors could arbitrage the difference between futures prices and spot prices. The futures price is given by: where: F = futures price S = spot price T = interest rate of the forward currency B = interest rate of the base currency T = maturity Users of futures contracts on currencies. Currency futures are a derivative instrument that can be used by hedgers, speculators and arbitrageurs. .A hedger uses the instrument to reduce risk by locking into a future exchange rate and mitigating risks due to adverse movements in the exchange rate. This can also reduce profits. A speculator uses the instrument to take a risk by betting on a position based on his view of the future exchange rate between two currencies. An arbitrageur profits from the difference in “price” between two places where the instrument is traded. While the first category is mainly dominated by importers and exporters of goods and services, the second and third categories are the strong point of traders. Currency Futures in India – Some Important Points Lot size of $1000, which is insignificant by global standards (Chicago MercantileExchange offers lot sizes of $1000). 12.5 million Japanese yen or 100,000 Australian dollars for a single contract), but traders expect this amount to be increased and many more currencies to be traded after futures trading is taken into account . The contract will be settled in rupees on the last business day of the month, based on