Driven by huge liquidity deficit in the banking system and an increase in hedging bets by importers, the one-month dollar/rupee forward premium rose to 3.30%, the highest since March 2022. The one-year forward rate rose to 2.54%, highest since October 2022.
The dollar-rupee forward premium is used by companies to make forex hedging decisions. A higher forward premium indicates that the market expects the rupee rise in the future.
Any change or inversion in the premium curve could impact the tenure of the hedges and thus, a company's decision on taking a hedge. "Continuous intervention through buy/sell swaps have led to this inversion in the forward premium curve," said a forex trader with a state-owned bank.
This story is from the January 04, 2025 edition of Financial Express Mumbai.
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This story is from the January 04, 2025 edition of Financial Express Mumbai.
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