Rupee Forward premium: Hedging cost has eased out
Mecklai Graph of the Day: Forward premium - Hedging cost has eased out. At the start of financial year 2012-13, exporters were enjoying widely on one-year forward premium that was hovering near 6.20 –6.50%.
Mecklai Graph of the Day: Forward premium - Hedging cost has eased out
At the start of financial year 2012-13, exporters were enjoying widely on one-year forward premium that was hovering near 6.20 –6.50%. Since last week the earlier concerns over Euro zone crisis, poor economic figures and domestic dollar demand have pressurized the local currency to re-test its previous low of 54.30.On other hand, selling in 12-month forward dragged premiums down from 330 to 254 paisa, thus lowering in annualized term from 5.7% to 4.5%. The central bank also intervened in the market, where instead of selling dollars outright, it has been matching dollar sale with a buy/sell swap - where it sells in the forward market so that the liquidity in the local money market is not affected.
It’s a good time for importers to hedge their current buyers credit and other short-term loans as the annualized cost have gone down hence the arbitrage between foreign currency loan vs. Rupee loan would be higher.The below graph shows the annualized one-year forward premium for USDINR
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
