Mumbai: Who is responsible for the instability in the currency market in the recent past? A Reserve Bank of India official has said forex hedging instruments became “weapons in the hands of corporates to trigger market instability” and they did not take a “well-deliberated and calculated call” while hedging the risk.
“Whether it is past performance-based booking or cancellation and rebooking, or EEFC accounts, the corporate deemed these instruments as unfailing profit channels rather than flexible operational tools to manage real-life business events.
These instruments have a tendency to exacerbate volatility in the markets and create a constant undercurrent of instability. That is why the RBI had to step in to moderate volatility and cushion the rupee fall,” RBI executive director G Padmanabhan said at the 23rd Annual Forex Assembly of the Forex Association of India. The rupee has fallen 26 per cent in the last one year.
made available a wide range of derivative products to enable those with foreign currency exposure to effectively manage their risk,” he said. The products include forwards, options and futures. One of the motivations for introduction of the products like exchange traded futures or options was to enable the small and medium enterprises to access the derivative market at competitive cost.
Source : financialexpress.com