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currency risks: Offshore forwards shoot up with dollar inflows for share sales

Summary

“Foreign investors may have entered into short-term contracts in the NDF market,” said Anindya Banerjee, currency analyst at Kotak Securities. This increases the demand for dollars at a future date, increasing the premium. Also, the US Fed comment cuts short dollar positions with long-term traders. “Higher premiums create opportunities for arbitrators, especially when local forward premiums are little changed,” he said.

MUMBAI: Forward premiums, a gauge of hedging demand, have increased by 35 basis points in the foreign derivatives market in the past six weeks as global investors begin to pour money into the exchange. sell shares of local companies. Rising premiums pave the way for arbitrage opportunities with local premiums showing little sign of rising. “Foreign investors may have entered into short-term contracts on the NDF market,” said Anindya.

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https://economictimes.indiatimes.com/markets/forex/cost-of-covering-currency-risk-jumps-offshore-paves-the-way-for-arbitrage-opportunities/articleshow/84524034.cms

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