The Indian rupee, which has recently benefited from a period of low volatility, faces heightened uncertainty with Donald Trump’s potential return to the U.S. presidency. The USD/INR exchange rate hit an all-time low of 84.3625 against the dollar, adding to previous losses as the dollar rallied amid increased risk for Asian currencies. Analysts warn that with Trump’s policies expected to include corporate tax cuts, deregulation, and potential tariff hikes on Chinese goods, the Indian rupee is likely entering a period of increased volatility. Companies are urged to manage their forex risks more proactively to mitigate possible fluctuations.
Economists and bankers predict that the rupee, typically stable within a narrow range, will likely see larger, more frequent moves. HDFC Bank’s Chief Economist, Abheek Barua, notes that the rupee may be “entering a period of somewhat increased volatility,” marking a shift from the low-volatility environment seen over the last year. Indian companies, accustomed to limited fluctuations in the rupee, will need to adapt their foreign exchange risk management strategies accordingly.
The rupee’s 3-month daily realized volatility has hovered between 1% and 2.5% this year—well below the 10-year annual average of 5%. Many Indian importers have traditionally maintained low hedge ratios, relying on the rupee’s stability and delaying hedging decisions until closer to payment dates. However, with the increased perceived risk, such strategies may need adjustment, according to a forex salesperson at a mid-sized bank.
Experts advise companies to hedge their near-term currency risks more cautiously, particularly over the next three to six months. Abhishek Goenka, CEO of IFA Global, recommends option hedges in addition to traditional forward hedges, especially for conservative clients with confirmed payment obligations.
This shift highlights the importance of prudent risk management as the rupee faces renewed volatility, underscoring the need for companies to be agile and proactive in managing forex exposure.
