Importers Banking on RBI Support

02 Mar

Indian importers are taking less insurance against Foreign Exchange fluctuations.
The data indicates, on expectations that the central bank will continue to intervene to keep the rupee above the key psychological level of ₹83 per $.
Dollar purchases by importers for delivery beyond the spot date dropped in February according to Reuters’ calculations based on data by the Clearing Corporation of India.
Importers bought about $1.24 billion daily, on average, in the forward markets this month, down from $1.50billion in January and from$1.54 billion in the October/ December quarter.
It is believed that large importers are looking at the USD/INR call spread o;ption structures.
Call spreads protect importers up to a certain price, but cost less than an outright call option and the Reserve Bank of India has likely been stepping in regularly to make the rupee does not fall below 83, a level that is considered critical by market participants.
The rupee declined to 82.95 on Monday, before recovering and held 25 paisa range last week.
The RBI’s intervention has helped the rupee sidestep a large part of the selloff in Asian currencies, fueled by the higher repricing of US Federal Reserve’s terminal rate.