Indian importers should use rupee's recovery to increase hedges, analysts say

FILE PHOTO: A man counts Indian currency notes inside a shop in Mumbai

By Nimesh Vora

MUMBAI (Reuters) - Indian importers should take advantage of the rupee's recovery against the dollar to hedge their liabilities due this year, analysts said on Thursday.

The rupee was up at 82.3250 per U.S. dollar, compared with 82.7250 in the previous session and the record low of 83.29 reached last week. The local unit had opened at 82.15.

"It makes sense for importers to utilise this dip (in USD/INR pair) and increase the proportion of their hedges," a forex sales associate at a Mumbai-based private sector bank said.

"We are advising that at the least, they should book a major portion of their exposure due till December."

The threat of oil prices, India's high trade deficit, and capital flow challenges suggest that the outlook for the rupee remains weak, the banker said.

Kunal Kurani, associate vice president at Mecklai Financial, said he is inclined to recommend to the firm's clients to buy dollars at current levels, but is waiting to see how other Asian currencies move through the day.

The rupee's recovery from record lows has been helped by expectations that the U.S. Federal Reserve would likely deliver smaller rate hikes after November.

Still, the Fed is expected to hike rates by 75 bps next week. Whether the U.S. central bank opts for a smaller rate hike in December will depend on the next two inflation readings, analysts said.

There remains enough uncertainty on the Fed side still for the rupee, the banker said.

"A dip in USD/INR and the current rise in crosses (EUR/INR, GBP/INR) are good levels to hedge appropriately," Srinivas Puni, managing director at QuantArt Market Solutions, said, noting that U.S. inflation "was far from being under control."

(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)