India’s importers are now in the crosshairs of the central bank, as its latest efforts to shore up the rupee expand from financial markets to the economy. Importers accumulated a record amount of currency hedges in September, a sign they’re bracing for more weakness after the rupee’s near 6% decline this year. Forward dollar purchases, a gauge of their demand, soared 44% to an average of $64 billion a month this year, compared with 2025, data from the Clearing Corp. of India show. For the RBI, the surge shows why curbing speculative bets against the rupee is no longer enough. The currency slid toward 97 to a dollar even after the central bank raised $133 billion through a diaspora deposit program and lifted its key policy rate for the first time in nearly four years. A break below that mark could open the path toward 100, a once-unthinkable level, analysts said.
The RBI believes that a lot of hedging activity, especially on the derivatives side, is speculative activity,” said A. Prasanna, head of research at ICICI Securities Primary Dealership Ltd. “They are taking steps that they think should yield some desired results, and when they find that’s not the case, they’re going to the next step. Maybe a holistic strategy is not in place yet.” In an interview to Moneycontrol late Tuesday, Governor Sanjay Malhotra said the central bank had observed a significant speculative element in currency derivatives and that forex markets were becoming “unduly pessimistic” about India’s economy. The RBI’s moves are having an impact. The rupee jumped 0.5% to close at 95.2838 per dollar on Tuesday, adding to a 1% gain in the previous session. The steps unveiled over the weekend take state-owned oil refiners, which need about $10 billion a month for crude imports, out of the market and make hedging more expensive for companies.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing