Hedging habit

.....The central bank has opined that the forex rates are determined by the demand and supply of that particular currency. Why should a corporate hedge its forex future exposure, be it a purchase or sale? Hedging is a cover to limit the loss on forex exposure. Intra day rate fluctuations at times move up to one rupee per dollar. The RBI directive highlighted in the editorial pertains to charging of higher risk premiums on loans made to corporates which have not hedged their forex exposure. But the compulsion to hedge may not be justified under regular rate fluctuations.......

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