Analysts said Thursday that exporters should wait for the dollar to retreat from its recent highs before hedging their future receipts in currencies other than the dollar.
Exporters who have shipped goods expecting to gain in the euro, pound and yen are looking at ways to manage currency risk as the dollar rises against its major peers, while the Reserve Bank has kept the rupee in a tight range. India (RBI).
The dollar index is hovering near a 20-year high, thanks to the Fed’s monetary policy tightening. Meanwhile, the rupee managed to avoid exceeding 80 against the dollar again due to the intervention of the Reserve Bank of India.
This means that the euro-rupee cross rate has fallen 1.5% since August, the British pound has lost 5% against the rupee, and the yen-rupee rate has fallen by 7%. The losses that have occurred since the beginning of the year to date are even deeper than that.
“We have advised exporters to hedge their risk exposure for several months,” said Sameer Lodha, Managing Director of Quan Art Market Solutions.
“Now, what we are saying is to wait for a bullish corrective move (at the crossovers) before making new hedges.”
Lodha said selling the euro and the yen in the futures market usually earns the exporter some bonus, and the generous premium on the yen and the euro provided some flexibility and flexibility.
Exporters can earn up to 5.5% to 6.5% as a premium when selling Euros and Yen for future settlement.
“We expect the dollar index to decline over the coming weeks, pushing these pairs higher. The rupee will be broadly stable,” said Arnob Biswas, head of forex research at SMC Global Securities. “Issuers can benefit from this corrective recovery.”
Biswas cited US consumer price inflation next week and the Federal Reserve’s September 20-21 meeting as events that could pull the dollar index down.
However, the dollar index will maintain an uptrend and any pullback is likely to be temporary, he said, as the dollar index is hovering near a 20-year high.