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Indian firms ramped up forex hedging in volatile election-results week

Tuesday,   11-Jun-2024   01:53 PM (IST)

The Indian rupee's choppy trading last week in the wake of the national election results prompted importers and exporters to hedge a larger portion of their foreign exchange book in the forwards market, data showed. Importers bought foreign exchange forward contracts worth $9 billion last week, a more than 70% jump from the same period a year before, data from clearing house CCIL shows. Exporters hedged $6 billion, matching the year-on-year increase for importers. The spurt in hedging activity came in a volatile week that started with the rupee rallying to 82.9475 per dollar on Monday after exit polls indicated a comfortable majority for Prime Minister Narendra Modi's party and its allies. But official results on Tuesday showed the ruling alliance party just about clung on to its majority, sending the rupee sliding to 83.53. The currency has been held in a narrow range, helped by the Reserve Bank of India's regular intervention. The central bank has repeatedly sold dollars near 83.50 to prevent it from breaching the all-time low of 83.5750, hit in April. On the flip side, the RBI is widely expected to use any major rallies in the rupee to build forex reserves.