$79 Billion Of Unhedged Debt Is Next Pain Point For Rupee
NDTV
Indian companies are rushing to hedge their overseas dollar debt against further declines in the rupee, a process that threatens to cascade into additional losses for the battered local currency.
Indian companies are rushing to hedge their overseas dollar debt against further declines in the rupee, a process that threatens to cascade into additional losses for the battered local currency.
The nation's firms had $79 billion of unhedged offshore loans at the end of March, about 44% of their total overseas borrowings, according to the latest data from the Reserve Bank of India. The cost of repaying that has been soaring as the rupee has tumbled more than 7% this year.
“We have seen increased activity among corporates to hedge their dollar exposure ever since USD/INR broke above 79,” said Parul Mittal Sinha, head of India financial markets at Standard Chartered Plc in Mumbai. “The proportion that is dollar hedged is expected to increase in the current risk-off environment, increasing dollar demand.”
The proportion of unhedged foreign loans has built up as companies were lulled into complacency about their dollar exposure by RBI's intervention, which ensured the rupee was less volatile than its emerging-market peers. In recent months however, stock outflows and broad dollar strength has seen the currency's losses accelerate and sent it to a series of record lows.
