Forex woes of Indian apparel exporters

12 May '08

2 min read

The picture isn't clear as yet but it seems that the rise in the Rupee over the last two years or so resulted in many apparel exporters getting into some of those exotic currency deals. It seems that some of the more aggressive banks persuaded apparel exporters to sign some cross currency swaps that could offset losses suffered by them because of the weak dollar.

Most of such exporters have been taken aback by the sudden surge in the dollar and are now faced with a double whammy. While the Rupee has not depreciated adequately against the dollar, the currency cocktails they had bought as a hedge have turned sour, the end result being losses on both the fronts.

Stories of several of Tirupur's knitwear exporters having burnt their fingers in currency trading are doing the rounds. The extent of their exposure isn't known but amounts involved are not insignificant by any standards. Possibility of textile and clothing exporters in other centres also having suffered similar losses cannot be ruled out.

Much would depend upon how the dollar performs against major currencies such as the yen and the Swiss franc, besides the euro and the pound, over the next few weeks. Should the surge continue, there may be significant upheaval in the industry.

Fibre2fashion News Desk - India

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