Mumbai, May 4 -- Mumbai: The Reserve Bank of India's (RBI) decision to cap banks' net open positions (NOP) at $100 million a day to curb speculative excesses in the foreign exchange market may also be reshaping investor behaviour and the long-term perception of India's exchange rate regime, warn market participants.

The cap, introduced on 27 March and followed by tighter curbs on related-party trades on 1 April, is aimed at breaking the link between offshore speculative activity and onshore exchange rate movements.

While the central bank clarified on 20 April that genuine back-to-back hedges, including those between domestic and overseas branches, would not be treated as speculative and allowed existing positions to run until maturity, ...