RBI swaps push rupee hedging costs higher, bankers say
In short
The RBI’s sell/buy swaps have made dollar-rupee forward premiums go up, bankers said. The one-year premium is up about 50 basis points this month.
This matters because companies that hedge dollar exposure now face higher costs. The report does not say how long the increase will last.
What the reporting says
The RBI's sell/buy swaps have pushed dollar-rupee forward premiums higher, according to publisher-supplied summaries. The reports say the one-year premium is up around 50 basis points this month, raising the cost of hedging dollar exposure after nearly $20 billion was drained from surplus liquidity. The immediate effect on exporters and importers is higher hedging expense, but the longer-term path is not stated.
Why it matters
The RBI's sell/buy swaps have pushed dollar-rupee forward premiums higher, according to the publisher-supplied summaries. The one-year premium is reported to be up around 50 basis points this month, increasing the cost of hedging dollar exposure. That directly affects importers, exporters and other users of FX hedges, but the reporting does not state whether the move will continue or how much of the increase is already priced in.