Hedgers line up to gain from crash in forwards after RBI's swap facility

The central bank said last week that it would swap up to $5 billion of three-year dollars with banks

Importers and foreign currency loan borrowers have increased their hedging, taking advantage of the crash in forward premium after the Reserve Bank of India (RBI) offered $5-billion swap facility with banks, according to currency dealers.

The one-year forward premium for dollar-rupee was 4.11 per cent a month back, and 4.05 per cent a week back, but is now at 3.57 per cent.

The premiums are likely to rise as more companies come forward to hedge. Forward premium is the fee a supplier of dollar takes to commit to supply dollar at the end of the agreed period.

The central bank