With massive foreign funds flowing into the country, the large currency movements have led to an increase in the number of deals on the forex market. Volumes and the number of deals have also soared, according to data from Clearing Corporation of India Ltd (CCIL).

Compared to 2006-07, the value of inter-bank forex transactions in the spot and forward segments has almost doubled. Foreign banks have taken a majority of buy positions in spot trades (57.08%) followed by public sector banks (28.42%), showed the data.

For the week ended March 28, 2008, volumes rose across all segments. The highest volumes were $1.88 billion on March 26 for cash and $2.27 billion on March 27 for T+1 transactions. The highest volumes for spot (T+2 transactions) were $8.74 billion on March 24 and $4.52 billion on March 28 in the forward segment.

In 2006-07, volumes in spot transactions stood at $884.74 billion, against $1.6 trillion on March 28, 2008. Volumes have also soared in the forward market. While in the forward market they were $342.65 billion in 2007, in 2007-08 it is pegged at $729.84 billion.

?Foreign inflows were massive this year. While the cash and T+1 segments have also risen, most transactions in the spot and forward segments are being used widely for hedging,? said Golak C Nath, vice-president & economic advisor at CCIL. He added that tourists and remittances to and from the country had also increased, leading to a rise in total deals.

Chetan Ahya & Tanvee Gupta of Morgan Stanley Research said in a recent report that on a 12-month trailing basis, capital inflows increased to an all-time high of $112.8 billion as on February 1, 2008, compared with $40.4 billion in the 12 months ended February 2, 2007.

?If there is a sharp rise in oil and other commodity prices, RBI could choose to allow appreciation in the exchange rate to offset this rise,? said the Morgan Stanley Research report.

The rupee appreciated on Wednesday, helped by flows into stock markets and dollar sales by exporters. But traders said central bank intervention curbed gains.