Tiruppur based Fabric Exporter Saved Rs.1,20,000 On Forward Rollover

Tiruppur based Fabric Exporter Saved Rs.1,20,000 On Forward Rollover

13 Jun 2020 03:43 PM
 

CASE

A Tiruppur based fabric exporter had booked forwards expiring on May 29th, 2020 but due to lack of inward remittances, he had to roll over the forward contracts. The challenge encountered by him was the uncertainty in the Rupee spot price and the severe liquidity crunch he was amidst.

The usual approach during a forward rollover is to aim for a higher spot so that the forward rate received is as high as possible so that even if it’s lost now it will be covered at the time of forward utilization. The aftermath in the client’s situation was incurring heavy cash loss on cancellation during times of liquidity crunch. The client would have needed funding to pay for the cash losses incurred by him.

SOLUTION

Myforexeye advisors suggested him to target a lower spot and wait until forward maturity date as huge dollar inflows were expected on account of FDI.

Since the client was a TPO customer our dealing desk executed the deal and negotiated the cancellation rate of 75.56 after adding the bank margin.

VALUE ADDITION

KEY WINS