The Hindu Business Line : Weak rupee helps exporters in general

New Delhi: Weakening of India's currency has reversed the fortunes of exporters but those who had entered into forward contracts for sale of dollars at the sub-40 level stand to lose.

Used to the appreciating domestic currency, several exporters had entered into forward sale contract for dollar below Rs 40 hedging the risk of reduced realisations.

However, increased demand for dollars, mainly from the crude oil importers, led to rupee losing ground by about five per cent in the past few days.

The rupee was trading at 42.09 today losing in the inter-bank market. "Exporters are terminating the contracts at a loss. At the same time, some of them are taking fresh contracts based on their calculation of further appreciation of dollar," said the P unjab National Bank General Manager (Treasury Operations) Mr Arun Kaul.

The Federation of Indian Export Organisation's Director General Mr Ajay Sahai said exporters have to take a calculated risk "by hedging at a value at which they are comfortable". However, for those who had not hedged their risk, rupee depreciation has co me as good news, especially when currencies of competing countries like China have appreciated.

The short-term hedging losses notwithstanding, the rupee decline has improved competitiveness of the Indian exporters who can be more aggressive in slackening economies like the US.

Analysts said with the trade deficit widening up to $80 billion in 2007-08 and the crude oil prices shooting up to $125 per barrel, the Indian currency may come under further pressure. - PTI

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