A Delhi based exporter with a monthly exposure of USD 100,000 was managing their forex exposure by booking window forward contract with their bank. They were availing 90% EPC (USD90, 000) of their exposure and were hedging only 50% (USD 50, 000) of exposure.
They came to Myforexeye to better optimize their forex risk management practices.
We advised the exporter to switch to fixed date forward contract from window forward contract as in latter they were getting premium till the start of the window period rather than the maturity date therefore losing premium for the differential days.
For e.g. Forward premium from 1st Jan till 30th April
Forward Premium using Window forward contract- 50 paise (1st April to 30th April)
Forward Premium using fixed date forward contract- 75 paise (30th April)
Secondly, the exporter was taking EPC, he was hedging it partially so we advised him to fully hedge the EPC to become independent of directional view (no concern of unfavourable Spot) https://www.myforexeye.com/pcfc-vs-rupee-packing-credit.
By switching to fixed date forward contract from window forward contract the exporter could save up to 20-25 paise per dollar INR 12,500 (50,000*0.25) and by fully hedging the EPC they could additionally save INR 30,000 (40, 000*0.75).
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A Maharashtra based exporter had an inward of USD 9,198 and the bank was quoting him a net rate of 73.08 when USDINR spot rate was at 74.34.
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An Ahmedabad based textile importer had an import forward booked for 22nd July at 74.59. On 2nd July, the client had to make an urgent payment of USD 49920.
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A Japanese Yen importer had a business arrangement with the seller to use RBI quarterly reference rate for import bill buying. The client was hedging the import bills (JPYINR) on the basis of previous quarter's reference rates published by RBI to hed
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A client had an exposure of USD 1 million receivable in seven equal tranches of USD 0.142 million each between August to February. He receives documents only one month before his receivables are due.
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A U.P. based exporter had an inward of USD 150,000 in May 2021 to be converted to Indian Rupees. Forward premium were at its 4.5 years high in May so cash spot discount was also high around 5-6 paise.