Some Indian exporters are stepping up hedges of their future euro receipts on bets of limited upside to the rupee after the common currency’s recent rally, analysts said.
The EUR/INR pair soared to 90.44 on Feb. 2, just ahead of the European Central Bank meeting, its highest level since April 2021. It was last trading at 88.30.
There is an urgency among exporters to hedge following the euro’s rally to above 88, a treasury sales official at a private bank said.
“In the portfolio that our bank manages hedging has gone up for around 70% of customers,” said another treasury sales official at a private bank who advises medium to small enterprises. It had nearly dried up about two months ago, the official added.
The EUR/INR premiums are almost twice the USD/INR premiums, encouraging exporters to take longer-term hedges.
The EUR/INR 1-year annualised premium is at 4.20%. This means that an exporter who is hedging at the current spot rate of 88.30 would have a 1-year hedging rate of nearly 92.
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