The rupee’s continuous slide against the US dollar has prompted Indian importers to seek medium-term cover for overseas payment liabilities as fears grow that the local unit is unlikely to rebound in a hurry. Companies are buying monthly forward contracts instead of fortnightly deals to help negotiate short term volatility, traders said.
“Hedging interest has increased among importers, who now expect the rupee depreciation against the dollar to continue,” said Anindya Banerjee, currency analyst at Kotak Securities. “The forward premium has also gone up in an early sign that demand for covers is rising.”
Companies now buying relatively longer-maturity currency forwards contracts are from sectors such as petroleum, electronics, coal, agri-products and shipping logistics, dealers said. “Importers are now rushing to buy two-three month forwards contracts unlike shorter maturity contracts a few weeks ago,” said Abhishek Goenka, CEO IFA Global, a Mumbai based forex consulting firm. “Higher demand will drive the forwards premium higher.”Separately, rising crude oil prices have raised fresh concerns over India’s fiscal condition as the country meets three-fourths of its oil demand through overseas shipments.