Rupee worries force India’s importers to hedge extra

August 24, 2022 12:00 am | Updated 05:41 am IST - MUMBAI

‘Domestic currency may possibly depreciate to 82 levels’

Worried about India’s precarious external accounts and the weakening rupee, domestic importers are hedging a lot more of their currency exposures than they are required to.

The rupee is down about 7.5% versus the U.S. dollar this year, and headed for what could be its worst year in four.

Trading just shy of its 80.0650 per dollar record low reached last month, the rupee has been under pressure from a ballooning oil import bill, high domestic inflation and the Federal Reserve’s aggressive rate increases that have elevated yields on the U.S. dollar.

That is in spite of the RBI’s efforts to defend the currency.

“We have a clear view right now. Considering India’s trade deficit issues and Fed rate hike view, we think rupee will depreciate more, possibly up to the 82 level,” said Rohit Maheshwari, CFO of Hero International B.V.

“Our normal policy is that 50% of the exposure should be hedged. But right now, we are hedging imports near to 80%, while leaving a large part of the exports unhedged.”

“Right now, there are a lot of risks around current account deficit and uncertainty about the Fed. That is why we are hedging almost 100% of our imports while leaving exports open to the extent allowed by our risk-management policy,” Anil Agarwal, CFO, J.K. Fenner (India) Ltd., said.

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