Did you know that the biggest financial market in the world is the foreign exchange, or FX, market? Forex is a portmanteau of foreign exchange.
In simple terms, forex trading means the simultaneous purchase of one currency and the sale of another, wherein the trader bets on whether a certain currency will rise or fall against another.
Such trading is facilitated by brokers, and deals are executed in currency pairs. Let us learn more about the currency pairs traded in India.
How Does the Currency Market Work?
In India, currency derivatives are traded on platforms offered by exchanges like the NSE, BSE, and MCX-SX.
You need a forex account to trade in the currency market. With Dhan, you can easily open a forex trading account to trade in USD-JPY futures, USD-INR futures, and other currency pairs.
What are the Currency Pairs Permissible in India?
On Indian exchanges, trading in currency derivatives instruments (futures & options) is available on four currency pairs: USD/Indian Rupees (US Dollars/INR), Euros/Indian Rupees (EUR/INR), Great Britain Pound/Indian Rupees (GBP/INR) and Japanese Yen/Indian Rupees (JPY/INR).
Apart from this, cross-currency derivatives instruments are also available on three currency pairs (EUR-USD, GBP-USD, and USD-JPY).
Contract Specifications – Futures & Options on INR pairs
Given below are a few details of trading in Futures & Options on INR pairs:
| Particulars | Details |
| Lots size | 1000 units of foreign currency |
| Underlying | The rate of the Indian Rupee against foreign currency |
| Tick size | 0.25 paise or INR 0.0025 |
| Trading hours | Monday to Friday 9:00 a.m. to 5:00 p.m. |
| Quantity freeze | 10,001 or greater |
| Settlement | Daily settlement : T + 1 Final settlement : T + 2 |
| Mode of settlement | Cash settled in Indian Rupees |
| Contract trading cycle | Up to 12-month contracts |
Contract Specifications – Cross Currency Futures & Option
Given below are a few details of trading in Cross Currency Futures & Options:
| Particulars | Details |
| Lots size | 1000 units of foreign currency |
| Underlying | The contract would be quoted in USD for EURUSD and GBPUSD and in JPY for USDJPY |
| Tick size | 0.0001 for EURUSD, GBPUSD, and 0.01 for USDJPY |
| Trading hours | Monday to Friday 9:00 a.m. to 5:00 p.m. |
| Quantity freeze | 10,001 or greater |
| Settlement | Daily settlement : T + 1 Final settlement : T + 2 |
| Mode of settlement | Cash settled in Indian Rupees |
| Contract trading cycle | Up to 12-month contracts |
Conclusion
The currency futures trading platform was launched by the NSE in 2008 and is now used by investors to hedge against foreign exchange risk.
These derivative instruments are highly liquid and have huge profit potential, but at the same time, they are also largely affected by the economic environment in the country.
Hence, traders should take all the factors into consideration before choosing a currency pair to trade. They should also perform their own technical and fundamental analysis to assess the viability of trading in the currency pair.
Disclaimer:
This article should not be taken as investment advice. Investing in securities carries a lot of risks. Kindly, do your own due diligence and talk to your financial advisor before investing.
