Currency exchanges are relatively new in India, hopefully RBI will give permission in the future to allow other currency pairs on the Indian exchanges.
If you were to open a forex trading account with an international broker who allows trading on these pairs, it will bea violation of the FEMA act, where RBI very clearly states that money which is remitted abroad cannot be used for leveraged instruments.
So as of now we have to wait, hoping exchanges get approval for other currency pairs like EURUSD, USDJPY and others
Rohan...I'm not sure as to why you cant trade on a non INR pair directly. RBI must have some reason for that. But you can set up a synthetic cross currency trade which can mimic a pair that in not available directly. Let me explain...
Let us assume you want to trade the GBP/USD Pair...this pair is also popularly called the "Cable". Your view is GBP will strengthen against the dollar. In other words you want to go long on GBP and Short on Dollar...or simply want to short the Cable.
You can do this by creating a synthetic trade..
Step 1) Go long on GBP INR ----> This means you are long on GBP and short on INR
Step 2) Go short on USD INR ----> This means you are short on USD and Long on INR
If you trade both these potions simultaneously you are both long and short on INR...this would net out and essential you have no view on INR.
What you are left with is Long GBP and Short USD...which is as good as shorting the Cable :-)
Adding to what Karthik and Nithin have said, to trade in non-INR pairs, one has to open an account with a foreign broker. The deposits are usually done in USD or EUR. This means, you are selling INR and buying foreign currency. Indian authorities wouldn’t want much of INR outflow from India, this might be a reason too. [also, there is FEMA 1999 violation by doing this]
I think the idea is to hedge against forex changes and safeguard the investment what we have made in current forex rate. Since the focus is on Indian currency hedged against forex changes, NSE currently allows only INR paired with 4 other foreign currencies. Two different foreign currencies as a pair is out of scope, as of now I think. But may be some other ForeignCurrency-INR pair might come up in future.