In a reflection of the narrowing interest rate differentials between the . United States (US) and India, one year dollar-rupee forward premium rates have declined to their lowest levels in 11 years, analysts said.
The plunge in forward premia, which benefits importers looking to hedge their currency exposure, has also been brought about by the reversal of an arbitrage opportunity that had sprung up in the previous month, analysts said.
On Friday, the one-year onshore forward premium rate was at 2.19 per cent, sharply lower than 2.40 per cent at the end of the previous month, Bloomberg data showed. The forward premium rate represents the interest rate differential between Indian and US bond yields. The rate differential has been narrowing as the pace of the Federal Reserve's rate hikes have outstripped those of the RBI. In 2022, the Fed has hiked rates by 375 basis points, while the RBI has tightened policy by 190 bps.
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