Trump’s US election win encourages Indian companies to be aware of forex risks By Reuters

Written by Nimesh Vora and Jaspreet Kalra

MUMBAI (Reuters) – The period of low volatility enjoyed by the Indian rupee may not last now that Donald Trump is poised to become the US president again, bankers and advisers have warned, urging companies to manage their forex risks wisely and quickly.

The rupee fell as much as 84.3625 to the US dollar on Thursday, adding to the previous day’s losses when the election result sent Asian currencies lower.

Investors dumped Asian currencies, and the dollar rallied against its major peers on bets that Trump’s expected policies of lower corporate taxes and deregulation would boost US growth.

In addition, Asian currencies should face the possibility of Trump raising tariffs, especially in China.

All this could mean a period of uncertainty and high volatility for Asian currencies, bankers said, adding that the usually muted Indian rupee would not be immune to the disruption that Trump’s policies could lead to.

The rupee is “likely to enter a period of more volatility with the risk of a major move in the coming months,” Abheek Barua, an economist at HDFC Bank said in a statement.

For Indian companies, which have been used to the rupee in a narrow range for a long time, this will mean adjusting the way they manage foreign exchange risk.

The 3-month daily rupee volatility observed this year has been in the range of 1%-2.5%, below the 10-year annual average of 5%.

Due to the rupee’s weakness, Indian importers have been keeping a low hedge ratio and were “more inclined to wait” until the settlement date is near, said a forex dealer at a central bank.

“That may not happen now that the perceived risk is gone,” he said.

Companies should be smart and hedge their near-term (next 3-6 months) risks, HDFC Bank advised.

Abhishek Goenka, founder and CEO of forex advisory firm IFA Global, said investors can choose a hedge to choose a forward-looking hedge, depending on their risk profile.

“To the extreme legal, we suggest that if you have confirmed the payments to be made, you can consider a combination of options and move forward.”