India's rupee records its biggest gain since 2013; the central bank intensifies efforts to curb speculative trading.

India Rupee hits its biggest rally in over 12 years, after authorities intensified efforts to crack down on speculative activities, expanding restrictions from a few days of tightening local bank position limits to offshore derivatives.

On Thursday, the rupee rose as much as 1.7%, to 93.25 rupees per US dollar, marking the largest gain since September 2013. The onshore rupee spot market resumed trading after being closed for two days. Meanwhile, U.S. President Donald Trump hinted that the Iran war could escalate, causing most Asian regional currencies to weaken.

The Reserve Bank of India said Wednesday evening that authorized foreign exchange dealers are now prohibited from offering rupee-denominated non-deliverable derivatives contracts to domestic or offshore clients. According to the statement, banks can still offer deliverable foreign exchange contracts for hedging purposes, but traders are not allowed to hedge these transactions by establishing positions in the offshore market.

Neeraj Gambhir, Executive Director of Axis Bank, gave an interview.

After direct market intervention failed to prevent the rupee from hitting a record low, the central bank is trying to support the rupee by cracking down on some of the most common ways to short the rupee. Traders typically use offshore derivatives and arbitrage trades to establish short positions.

“This is a more effective measure to curb offshore rupee speculation,” said Dilip Parmar, foreign exchange analyst at HDFC Securities.