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Rising rupee worries exporters, consider hedging

Oct '09
Textile and apparel exporters are worried over the unfavourable impact; the rising rupee could create against the US dollar, due to which they could consider hedging, to protect themselves from its fluctuations.

Hedging helps in reducing the risk associated with currency fluctuation and is akin to buying an insurance policy. By means of hedging, the exporters insure themselves against any future fluctuations.

The rupee has appreciated considerably against the US dollar in recent weeks and is sending tremors across the exporting fraternity and this has come at a time when the sector was seeing a recovery after witnessing the worst in the last few months.

Margins are the first casualty of an appreciating rupee. Deals are signed months in advance and any appreciation of the rupee first impacts the margins, which can also lead to losses on the orders that are dispatched in that period.

In May 2009, the rupee was trading at nearly 50.49 to the US dollar, on September 28, it further rose to 47.97 and now on October 26 it has further slipped to 46.59, which means it has appreciated by nearly Rs 5 in as many months.

Fibre2fashion spoke to Mr Varghese Mathew, MD, Remya Apparel, who said, “Since buyers will not increase price, we will have to adopt more stringent cost control measures and the rest of the losses will have to be borne by exporters”.

Worried over an adverse impact on export earnings due to rising rupee against the US dollar, several north Indian export companies are mulling hedging against the volatility of the Indian currency.

Fibre2fashion News Desk - India

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