By Nimesh Vora
MUMBAI, Feb 28 (Reuters) - Indian importers are taking
less insurance against foreign exchange fluctuations, data
indicates, on expectations that the central bank will continue
to intervene to keep the rupee above the key psychological level
of 83 per U.S. dollar.
Dollar purchases by importers for delivery beyond the spot
date dropped in February, according to Reuters calculations
based on data by the Clearing Corporation of India.
Importers bought about $1.24 billion daily, on average, in
the forward markets this month, down from $1.50 billion in
January and from $1.54 billion in the October-December quarter.
"With the RBI active, importers are eyeing the 83 level and
waiting. Instead of forwards, they are looking at options," said
Abhishek Goenka, chief executive of IFA Global, which manages or
advises on over $20 billion worth of Indian companies' forex
exposure.
Large importers are looking at the USD/INR call spread
option structures, Goenka said. Call spreads protect importers
up to a certain price, but cost less than an outright call
option.
The Reserve Bank of India has likely been stepping in
regularly to make sure that the rupee does not fall below 83, a
level that is considered critical by market participants. The
rupee declined to 82.95 on Monday, before recovering,
and held a narrow 25-paisa range last week.
The RBI's intervention has helped the rupee sidestep a large
part of the selloff in Asian currencies fuelled by the higher
repricing of the U.S. Federal Reserve's terminal rate.
"Not once has it (USD/INR) closed above 82.90, forget 83, in
this period in which the Fed has become a bigger unknown," a
forex sales official at a mid-sized private sector bank said.
"The RBI is obviously the biggest piece, but we think
India's changing external risk profile is playing a part too."
India's trade deficit narrowed to a 12-month low in January,
while its service surplus unexpectedly reached a record high.
The country's imports of $50.6 billion in January was less
than December's $58.2 billion, November's $56.7 billion and
October's $58.2 billion.
This has prompted economists to lower the current account
deficit projections for the current and next fiscal years.
The sales official noted that March is a seasonally
favourable month for the rupee, giving importers another reason
to reduce hedges to the extent their risk management policy
allows.
Still, Bhaskar Panda, head of overseas treasury at HDFC
Bank, said importers should not rely too much on the rupee's
current narrow range.
"To think that the rupee will be contained at 83 and to base
hedging decisions on that is not advisable," Panda said.
"There is just too much uncertainty right now for importers
to take more risks. They should follow a consistent hedging
policy and not base decisions on a particular level holding up."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Average daily forward $ purchases by importers ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Nimesh Vora; Editing by Savio D'Souza)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.