Exporters caught off guard over rising rupee

The speed with which the rupee has climbed against the US dollar has caught exporters off guard, who were until recently betting that the rupee was moving towards Rs 60. But the rupee has reversed its trajectory.

Between September 5 and now, the rupee has appreciated 7.01 per cent, and since September 17, the rupee has gained 3.7 per cent. The rate on October 5 was Rs 51.61 - a decline of Rs 4.28 from Rs 55.89 since September 5.

The exporters are worried about the dollar breaching the Rs 50 mark in the near term. For software exporters, not only are margins under clear pressure in the near to medium term, but a weak dollar will bring in only fewer rupees going ahead. "Every one per cent change in the rupee value against the dollar will hurt our margins between 0.40 per cent and 0.50 per cent. This ratio, of course, differs for different companies," says Rostow Ravan, Chief Financial Officer of the Bangalore-based mid-tier information technology company MindTree. Half of the company's exposure is hedged for a 12-month period. And, this was hedged at an average Rs 52 for the year 2012-13 and for Rs 57 for the year 2013-14.

The exporters, the chief financial officer says, will take a hit only in the near to medium term, but it will augur well in the long term for everyone. According to him, an appreciating rupee means leads to lower rates of inflation and, hence, lower costs of living. This will help companies to control staff costs.

"The fluctuation of the US dollar between Rs 46 to a dollar all the way up to Rs 56 to a dollar and back to about Rs 51 to a dollar in a period of 12 months highlights the economy, fiscal and policy indecisiveness the country is going through," says Vivek Mallya, partner at the Bangalore-based chartered accountant firm, Bhat, Mallya & Associates.