Firms Advised To Book Forward Dollar

Foreign exchange treasuries of banks and private forex advisory services are encouraging corporate clients with exposures maturing in the first two weeks of March to book the forward dollar.

This would enable them to hedge against any uncertainty about the exchange rate that might arise after the Budget is announced.

Historically, the rupee has always depreciated at this time as a result of high volatility and panic in the market.

However, this year, the rupee has remained very steady. Nevertheless, uncertainty might prevail as the Budget is an important event. So we are advising our customers to hedge at least for the first two weeks of March, said a dealer with a foreign bank.

The premiums now stand at attractive levelstwo paise for February and 12 paise for the first two weeks of March. Hence, the cost of booking the dollar now would be about 14 paise.

However, if the importer left his position uncovered and if the rupee depreciated to Rs 36.3, he would have to pay 40 paise more (given the present inter-bank rate of 35.895).

While most importers maintain a conservative attitude and cover their forward exposures, many importers, encouraged by the rupees stability over the past six months, preferred to leave forward positions uncovered.

They are expected to come in to cover their positions next week when they will only have to book for the first two weeks of March.

Dealers agree that the volatility and panic that characterised the market last year would not be witnessed this year. Any uncertainty that prevails immediately after the Budget should even out towards March-end.

A strong undercurrent prevails regarding the dollar crossing Rs 36.3.

The rupee has remained steady for too long. Inflation rates have been rising. We can expect to see a correction very soon, a dealer said.