Importers Rush to Hedge as Rupee Recovers Under RBI Curbs
Importers are rushing to lock in dollar hedges after RBI curbs sparked a rupee rally. This demand pushed hedging costs up by the most since the 2009 crisis.
A significant rally in the Indian rupee, driven by central bank measures to limit speculative and arbitrage positions, has triggered a scramble among importers to secure dollar exposure. In India, the cost of hedging the USD/INR pair has surged by the most since the 2007-2009 global financial crisis. One-year dollar hedging costs climbed 30 basis points to 3.96% on Monday, building on a 70-basis-point jump from the previous Thursday. This volatility follows the Reserve Bank of India's (RBI) intervention to rein in corporate arbitrage activity, which had previously mitigated the impact of bank position restrictions.
