Importer Saved From Paying A Higher Spot In Turbulent Times

Importer Saved From Paying A Higher Spot In Turbulent Times

29 May 2021 01:59 PM
 

CASE

A client had opened an import L/C for EUR 500,000 on 11th January 2021 with an expected due date of 31st March 2021. The client was unsure if he should hedge his position or not.

SOLUTION

EUR/INR spot was at 89.21 at initiation with a forward rate of 90.18 for 31st March 2021.

Myforexeye team had a view that EURINR would appreciate from these levels and advised the client to wait before taking any hedge decision.  

On 31st March the client paid 60% of his dues at 85.60 and deferred the repayment date for his remaining dues of EUR 200,000 by 30 days.

The client paid the remaining 40% of his dues on 30th April at 89.60. Our team forecasted that EURINR might appreciate and suggested the client to take a short position in the futures market by selling 200,000 Euros in the futures market.

The client squared off the position with a gain of one rupees per euro.

VALUE ADDITION

The client managed to save 13.74 lakhs ((90.18-85.60) ×300,000) by keeping his position open and additional 2 lakhs (1×200,000) by taking a short position in the futures market. He saved a total of 15.74 lakhs in this transaction.

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