Forwards Up, Importers Go For Select Cover

Bucking the trend, importers sought cover in the foreign exchange market on Thursday as aggressive intervention by the Reserve Bank of India (through a clutch of public sector banks) and corporate demand for dollars pulled down the spot rupee and jacked up forward premiums.

Exporters too cancelled export contracts (buying the dollar back which they had earlier frantically sold to realise their receivables). Till today, exporters were frantically selling dollars as they thought the rupee could only strengthen further and hence they would stand to lose if they did not sell dollars immediately.

However, foreign exchange dealers do not feel that this is the beginning of a reversal of the trend.