There are other less-complicated options for exporters to hedge, especially with the rupee's implied volatility at multi-year lows, analysts said.įor example, any option structure that is net long on volatility will help exporters take advantage of the low implied volatility. On hitting that limit, the option ceases to exist and the exporter is unhedged.įurther, using the example above, if the rupee depreciates below 88, the exporter is still obligated to sell at 88. The caveat, however, is that the exporter's 'profit' is capped at an amount decided at the time of entering the option. "A lot of our exporter clients have reached out to us with queries on TARFs."Ī TARF, or target accrual range forward, is an options structure that allows exporters to sell dollars at a far better than forward rate.įor example, an exporter can execute a structure to sell $0.25 million each month for the next four years at 88 rupees. "The unprecedented low-carry environment prevailing in USD/INR at this point has compelled people to look for innovative ways to augment carry," said Abhishek Goenka, CEO of IFA Global, a risk management firm that advises companies that have a combined exposure of over $20 billion. This fall in forward premiums, or the low carry, means exporters get a relatively unfavourable USD/INR rate when they hedge their dollar receivables.
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