This is the best time for companies with a natural hedge to actively manage it by covering imports at the spot and selling the equivalent amount of exports forward to 3-months
With Brexit taking one of the most difficult hurdles out of the picture, the grand scheme of a “United States of Europe” will accelerate towards fruition
It is still a long time till 2024 and the lies will continue. But, so will the protests as more and more Indians have gotten over the TINA concern and are willing to stand up and act themselves
If inflation is set to rise globally—contrary, by the way, to what most analysts expect—what would be the implications for equity markets and the rupee?
Since 2014, the periods of strength have been shorter (354 days, on average) as compared to the period between 2006 and 2014 (502 days); correspondingly, the periods of weakness have been longer—the average since 2014 was 4
Markets are generally anything but neat. Thus, exporters should continue to follow a systematic programme of hedging with a risk limit and regular hedges.
India needs to permit selected “other financial institutions” to access the FX market to a particular limit. This would increase both liquidity and volatility
If this market collapse, as some fear, is the big one, it will be driven by a realisation that all the Fed’s horses and all the Fed’s men can do nothing to put the economy back on the rails again
The gap between USD-INR 3-month implied volatility (6.58%) and the realised volatility over the past 90 days (4.55%) is huge and has been sustaining for over a month. Market expects some sort of dramatic move in the rupee ove
Gold and the euro operate on different paths and with different triggers, more so, in more recent times, when the relative liquidity of both markets has changed dramatically in favour of the euro
A bird in the hand is worth (often much more than) two in the bush. With premiums still around 4% a year, exporters should ensure that they are never more than half exposed
The shocking part is that the powers-that-be seem to be oblivious—it is almost as if the government genuinely believes that things are not that bad and are, of course, getting better.
As VPIs, we need to find as many Indians like this as we can, support them (both financially and with other critical enablers) and help them change the country
Importers should continue to thank their stars that the trauma anticipated when the rupee last collapsed has not come to pass. Again, with premiums quite attractive, a reasonable hedge out to three months would be sensible
It does seem as if the long overdue rebalancing is coming to pass, with the Euro, which is, in any case, number two on the totem pole, likely to gain more share across the board
A 50% hedge, while it has the same 1.6 return/risk profile, is a better strategy since the risk is cut in half. But, that is about hedging, which is boring.
Today’s story appears to be different, and, if equity volatility continues to climb, we could see currencies and gold unstable for a longer period, as they were back in 2008
Over the long term (10 years) the correlation between USD-INR and EUR-USD was as high as 81%; over a shorter horizon, the correlation is much lower (20-25%).
Given the atrocities that have been carried out by the police towards citizens, especially the minorities. It calls for reforms within the machinery to prevent such outcomes