Rupee rally continues; importers recommended to increase hedging

By Nimesh Vora

MUMBAI (Reuters) – Importers should use the Indian rupee’s rally to the highest in nearly three months to hedge a large part of their near-term foreign payments, bankers and analysts said on Monday.

The rupee was at 82.9475 to the U.S. dollar at 11:20 a.m. IST, compared to the previous close of 83.00. The currency had climbed to 82.9150 earlier in the day, the highest since Sept. 22.

“After Friday’s surprising knock down (on USD/INR), we are seeing a bit of sideways around 83, which you would expect,” a fx sales person at a bank said.

“If you are an importer, it would be tempting to see if there is more room to run. However, we think a more prudent approach is to at least hedge out most of the payments that are due this month.”

The rupee has managed to strengthen past 83 largely on the back of surging equity inflows. Foreign investors bought more than $1 billion of Indian shares on Friday, according to provisional data. That follows $1.5 billion of purchases from Monday to Thursday, according to NSDL data.

If the pace holds, foreign inflows in December are likely to be the highest this year.

Meanwhile, other Asian currencies were mostly weaker after Federal Reserve officials sought push back against the dovish interest rate outlook that investors are pricing in.

New York Fed President John Williams, in a CNBC interview, said the Fed “isn’t really talking about rate cuts right now” and it’s “premature” to speculate about them.

(Reporting by Nimesh Vora; Editing by Varun H K)