By Nimesh Vora and Jaspreet Kalra
MUMBAI (Reuters) – Indian companies with future receivables in major currencies besides the U.S. dollar should consider reducing their hedge ratio to potentially benefit from the weakness that is expected to continue plaguing the greenback, bankers and forex advisors said.
With the dollar under pressure from tariff-driven outflows, downgraded U.S. growth forecasts and shifting investor outlook, forex strategists are encouraging exporters to reassess their hedging strategy in the euro, yen and pound receivables.
These hedges are usually in the form of forward contracts, locking in a fixed rate and protecting against exchange rate fluctuations.
Forex advisory firm IFA Global CEO Abhishek Goenka anticipates further upside for the euro, pound and yen against the dollar and believes a lower hedge ratio for rupee crosses combined with a stop-loss will boost profits for exporters.
The dollar index, which measures the greenback against six major currencies, fell 3% last month and has slid a further 4.5% so far in April, taking it to near three-year lows.
The dollar’s slide has aided the rupee, though not enough to match the rally in the major currencies—sending euro/rupee and yen/rupee cross rates higher by more than 5% in April. The pound/rupee cross is at a lifetime high.
Analysts expect more upside on these crosses, underpinned by sustained dollar weakness.
“Our FX strategists have turned very negative on the U.S. dollar, especially against the yen, euro and Swiss franc,” Goldman Sachs said in a note.
The brokerage’s main reasons are valuation, given the Federal Reserve’s real trade-weighted dollar index is still 20% above its long-term average, and the expected hit to economic growth from President Donald Trump’s tariffs.
In fact, Goldman sees a 45% chance of a U.S. recession, with Barclays expecting one as soon as the second half of 2025.
Therefore, fund managers are more convinced now than in any period since 2006 that the dollar will continue to depreciate, according to a recent BofA Securities survey.
The balance of risks is “clearly in favour” of under-hedging for exporters invoicing in euro and pound, despite the high carry, said an FX salesperson at a bank, requesting anonymity since he is not authorised to speak to the media.
(Reporting by Nimesh Vora; Editing by Savio D’Souza)
