The Indian rupee surged by the most in over 12 years after authorities escalated efforts to curb speculative activities, expanding restrictions on offshore derivatives just days after tightening limits on banks' local positions.

On Thursday, the rupee strengthened by as much as 1.7% to 93.25 per U.S. dollar, marking its biggest single-day gain since September 2013. Trading resumed in the spot market after a two-day holiday. Meanwhile, most Asian currencies weakened as U.S. President Donald Trump hinted at a potential escalation of conflict with Iran.

Late Wednesday, the Reserve Bank of India announced it had prohibited authorized foreign exchange dealers from offering non-deliverable rupee derivative contracts to clients, whether onshore or offshore. According to the statement, banks may still offer deliverable foreign exchange contracts for hedging purposes, but counterparties are barred from hedging these trades by establishing positions in offshore markets.

After direct market intervention failed to prevent the rupee from sliding to record lows, the central bank is now attempting to support the currency by targeting some of the most common methods used to short the rupee. Traders often utilize offshore derivatives and arbitrage strategies to build short positions.

"This is a more forceful measure to curb speculative activity in offshore rupee trading," said Dilip Parmar, a foreign exchange analyst at HDFC Securities.