Importers rush to hedge while exporters wait on sidelines

Importers are rushing to hedge their dollar positions amid the sharp depreciation of the rupee against the American currency and expectations of further volatility even as exporters are holding off after suffering mark-to-market (MTM) losses on earlier hedges.

- SUBRATA PANDA & ANJALI KUMARI

Market insiders say the surge in hedging costs may deter companies from raising dollar bonds now though some may still tap the market if they expect the rupee’s downside to be limited.

The rupee extended its losses on Thursday to touch a fresh low of 90.41 as capital outflows continued, coupled with lingering uncertainties over trade negotiations with the United States (US), and this weighed on market sentiment, dealers said.

The rupee gained back all its intra-day losses to close at 89.98, improving from the previous close of 90.20, on the back of dollar sales by foreign banks. Dealers said there was limited intervention from the Reserve Bank of India (RBI). The domestic currency earlier this week stumbled past 90. In less than a year, the rupee has slid from 85 to 90. This is the second quickest fall since the taper tantrum (2013).

The rupee was hovering near 88.5 in mid-November. It has depreciated more than 5 % percent this financial year (FY26) and 4.85 per cent this calendar year.

Additionally, the rupee has been the worst-performing Asian currency even though the dollar index has been trading below 100.