Analysts on Thursday said Indian importers should take advantage of the rupee’s recovery against the dollar to reduce their liabilities this year.
The rupee had hit a record low of 82.3250 per US dollar and 83.29 last week as compared to 82.7250 in the previous session. The local unit was open at 82.15.
“It makes sense for importers to use this fall (in the USD/INR pair) and increase their hedge ratio,” said a forex sales associate at a Mumbai-based private sector bank.
“We are advising that, at a minimum, they should book a substantial portion of their exposure by December.”
The banker said the threat of oil prices, India’s high trade deficit and capital inflow challenges suggest that the outlook for the rupee remains weak.
Kunal Kurani, Associate Vice President, Mekalai Financial, said he would like to advise the firm’s clients to buy the dollar at current levels, but is waiting to see how other Asian currencies play out during the day.
The rupee’s recovery from record lows has been helped by expectations that the US Federal Reserve will hike smaller rates after November.
Still, the Fed is expected to hike rates by 75 bps next week. Analysts said whether the US central bank opts for a smaller rate hike in December will depend on the next two inflation readings.
The banker said there is still substantial uncertainty on the Fed side for the rupee.
“The decline in USD/INR and the current rise in crosses (EUR/INR, GBP/INR) are good levels to hedge appropriately,” said Srinivas Puni, Managing Director, QuantArt Market Solutions. is under control.”
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