Exporters have little to cheer about even as Rs flirts with 54 to a dollar
Exporters aren’t quite rejoicing at the sharp slide in rupee from 45 to a dollar in August to 54.3 in mid-December. When hedging turned costtlybusiness Updated: Dec 23, 2011 22:05 IST
Exporters aren’t quite rejoicing at the sharp slide in rupee from 45 to a dollar in August to 54.3 in mid-December.
Most of them had hedged their dealings at between 46-47 to a dollar — meaning their buyers will only pay R46-47 for every dollars’ worth payment — even though the prevailing exchange rate is significantly higher.
For exporters a falling rupee — generally considered good as they get more rupees per dollar — has come all too sudden.
Hedging is a condition in which an exporter signs a contract with a buyer that he would pay R47 to a dollar at a future date (usually a few months from the shipment of the product) even if the actual value is different.
“We run companies,” said M Rafeeque Ahmed, chairman, Farida Group, a Chennai-based leather goods exporter. “We do not know how currency markets operate. Volatility doesn’t help us because we do not know how to hedge on a daily basis.”
In Tamil Nadu’s textile exporting hub of Tirupur, the mood isn’t quite celebratory.
“Due to interest hikes, high cotton prices and inflationary pressures that the textile industry is facing, we hedged our forex future exposures; but today things have turned and it is not a happy situation for us,” Muruganandan, managing partner, Gomathy International, a textile exporter from Tirupur told HT.
“Though exporters have not made losses but their profits are not in line with the fall in the rupee,” said a Mumbai-based foreign exchange treasury analyst.
“Exporters who already sold-off their dollars won’t be able to realise profits as they thought earlier,” said Shamik Bhose, executive director, Microsec Commerze, a firm dealing wih futures and commodity trading.
The Federation of Indian Exporters Organisation said that despite the recent depreciation, exporters should hedge risk as it is not possible to forecast rupee movement in the short-to-medium term.