CITIGROUP says Indian corporate clients broadly expect the rupee to weaken
further and are increasing allocations to hedges and structured FX products.
Vandana Bhatter, head of corporate FX sales for Asia at Citigroup, said clients
view longer-term rupee moves as tracking interest-rate differentials and are
shifting into structures that offer protection while allowing participation if
the rupee moves sharply. The rupee has fallen about 11% versus the dollar over
the past year, the weakest performance in Asia. Citigroup cites higher US
tariffs on India last year, the Iran war and its impact on oil, and market
expectations of a higher-for-longer Fed and stronger dollar as key drivers.
