The Indian rupee is poised to rally at the open on Monday amid arbitrage unwinding prompted by the central bank’s curbs on onshore ​position limits.

The Reserve Bank of India late Friday directed banks ‌to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each business day, with compliance required latest by April 10.

The RBI’s curbs on onshore ​position limits are expected to lead to dollar selling by banks in ​the domestic foreign exchange market amid unwinding of existing arbitrage positions.

These ⁠arbitrage trades were built by buying dollars onshore and selling them in ​the NDF market to exploit the spread between the two segments.

This spread had widened ​significantly amid a pickup in volatility and the fall in rupee on heightened risk aversion and oil-driven pressures linked to the Iran war.

The size of such positions is estimated at $25 billion ​to over $50 billion.

The pressure on the rupee has been intense amid persistent portfolio ​outflows and mounting concerns over the impact of higher oil prices on India’s economic outlook.

The rupee ‌has ⁠dropped more than 4% in March through Friday, putting it on course for its worst monthly performance in more than seven years