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Our Bureau

Dun & Bradstreet advocates hedging currency risk

Kochi May 10 The sharp rise in the value of the rupee vis-à-vis the dollar and the spurt in domestic interest rates have begun to hamper exports.

Speaking at a seminar on `Foreign Exchange and Credit Risk Management - Emerging Trends', Mr P.J. Thomas, DGM, State Bank of India, said that the Government would have to intervene and make exports intrinsically competitive to enable it to retain its competitive edge in international markets.

The seminar was organised by the Federation of Indian Export Organisations (Southern Region) in association with the Kerala State Export Trade Development Council (KEREXIL).

In his presidential address, Mr Yoonus Kunju, Director of KEREXIL, said the focus of the export sector had turned to the promotion of handloom, handicrafts, cottage and tiny industrial sectors, which had all been provided additional export incentives in the recently announced Annual Supplement 2007 to the Foreign Trade Policy. The policy supplement also focused on the agricultural and IT sectors.

In fact Mr Kunju pointed out that agricultural exports, forest-based products and value-added agricultural exports formed the heart of the new policy framework. This, he said, would work in favour of states like Kerala, which have a high level of agricultural and agro-based export products including coir, cashew, marine products, pepper, cardamom and a variety of other spices — over and above value-added products such as spice oils and oleoresins.

With the rupee's strength having exploded out of RBI's weakening grasp, virtually every company with significant export earnings has taken a hit on its margins, a statement from Dun & Bradstreet India pointed out.

No less than Infosys has acknowledged a drop of 110 points in its margins as a result of the rupee's appreciation, and goes into the next financial year with $400 million of covered exposures, the statement said.

It advised exporters to hedge their earnings since there is a likelihood of the rupee appreciating this year as well.

Currency risk is a wild card in today's export scenario as the volatility in the dollar/rupee exchange rate continues.

While Dun & Bradstreet India advocated hedging currency risk, it said that it had to be applied prudently to minimise the risks and maximise the returns.

More Stories on : Forex | Exports & Imports | Interest Rates | Kerala

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