Rupee depreciation can hit Exporters too !

Rupee depreciation has not only rattled the businesses involved in importing goods and services, but also exporters to the extent of margins eroded on account of excess volatility in the rupee-dollar exchange rate.

Yesterday, the rupee had hit an all-time low of 52.70-mark against a dollar led by strong demand for the greenback from banks and importers, and reemergence of the American currency as a safe-haven global asset.

However, today the rupee value retreated some of its gain, back to 52.20-mark per dollar, on likely intervention of the RBI to stabilize rupee by asking state-run banks to sell dollars in the market.

clip image002 Rupee at all time low of 52.20 against a dollar !

Moreover, the excess volatility in the value of rupee has not only concerned the importers, but also exporters as their margins take a moderate hit on account of steep rise and fall in rupee value which can not be accurately hedged on timely basis. Also, the rupee depreciation would lead to rise in travel, wage and power expenditures over a period of time.

What’s more? Even CFO of IT bellwether Infosys Ltd, V Balakrishnan, shared his discomfort with steep plunge in rupee value when he said to NDTV Profit that the RBI should intervene in the currency markets to stabilize rupee and save it from making new lows. In fact, the Infosys honcho has confirmed that they’re not revising the revenue guidance for this year, given the deteriorated situation globally.

Even iGate CFO Sujit Sircar was quoted as, “In the short term, this makes sense for us because we will have a higher profitability. However, things like travel, power, and general capex will go up. In the future, wage pressures may also go up.”

IS RBI listening to India’s woes?

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