The Hindu Business Line : Rupee may continue to gain for 3-4 months: PHDCCI survey

THE hardening of the rupee against the dollar is expected to continue for the next three to four months due to the US economy's big trade deficit and weakening of the dollar against other currencies such as the euro and pound sterling, a PHDCCI survey has said.

A survey undertaken by the chamber on a select sample of large, medium and small exporters, has concluded that 80 per cent of the respondents feel that the hardening of the rupee against the dollar would continue in the medium term for at least another three to four months.

Apart from the big trade deficit in the US economy, huge inflow of dollars to India due to the renewed interest of FIIs in the Indian bourses, has also contributed to the rupee appreciation against the greenback, the survey said.

Though 85 per cent of the respondents said that nearly 90 per cent of their export transactions were being conducted in terms of the dollar, the survey found that there is now an increasing trend towards going for multi-currency transactions involving the euro and the pound sterling.

"But the steady appreciation of the rupee in terms of dollar may prompt a large number of exporters to go for hedging by increasing their exposure in other international currencies," the survey said.

On what would be the optimal exposure to export transactions in various currencies, most of the exporters felt that at least 45 per cent of the transactions should be in dollar terms even if the dollar continues to depreciate vis-à-vis the rupee.

"Dollar depreciation may be a short-term phenomena and there is the possibility of the greenback bouncing back in view of the pick up in the US economy," they said, suggesting that the remaining 50 per cent of the export transaction exposure should be in euro, pound sterling and yen.

More than half of the exporters said the real impact of rupee appreciating against international currencies would not be felt, as there has been an over-heating of the commodities in the range of 10 per cent on an average in the international market.

The exporters also said that foreign exchange fluctuation would not compel the exporters to arbitrage against various currencies because smaller exporters were not equipped to manage foreign exchange in such a way as to take advantage of the volatile movement of the currencies.

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