- The short — five-line brief
- INR guardrails & stress bands
- Importer hedge ladder (1–3 months)
- Exporter hedge ladder (1–3 months)
- Rates spillover & collar math (illustrative)
- Do / Don’t list for treasury
The short
- Direction: A stable-to-soft USD/INR path favors staggered importer cover; exporters keep dry powder for spikes.
- Bands: Use three guardrails: Base 83.5–85.0 · Soft <83.0 · Stress >86.0 (illustrative bands for planning).
- Tenor: Keep 1–3M as the “workhorse” window; extend only if stress triggers fire.
- Rates: Front-end firmness lifts fwd points; collars become cost-effective as vols ease.
- Play: Importers ladder forwards 25/35/20; exporters run seagull/collar overlays on 30–50% exposure.
INR guardrails & stress bands (planning)
| Band | USD/INR | Bias | Treasury cue |
|---|---|---|---|
| Soft | < 83.0 | INR stronger | Importers extend cover on dips; exporters lighten cover, prefer participative collars |
| Base | 83.5–85.0 | Range | Importers 60–70% 1–3M; exporters 30–40% with floors |
| Stress | > 86.0 | INR weaker | Importers step-up to 80–90%; exporters add forwards, reduce options |
Importer hedge ladder (1–3M)
Coverage plan (illustrative)
- Week 1: 25% 1M forwards
- Week 2: 35% 2M forwards
- Week 3: 20% 3M forwards
- Optional: 10–20% collars if vols cheap (floor ATM−₹0.30; cap ATM+₹0.60)
Triggers to accelerate
- USD/INR breaches stress band or 20D vol jumps > 1.5× baseline
- Front-end rate prints push forward points sharply higher
- Commodity invoices bunch into a tight cash-flow window
Exporter hedge ladder (1–3M)
Coverage plan (illustrative)
- Base band: 30–40% 1–3M forwards
- On spikes (> band): Add 20–30% forwards; top with low-cost collars or 1×2 seagulls
- Participation: Maintain upside with partial floors; avoid 100% straight forwards unless stress persists
When to lighten
- INR rallies into Soft band with vol crush
- Order book visibility < 6 weeks (don’t over-hedge)
- Forward point differential turns punitive vs margin
Rates spillover & collar math (illustrative)
| Tenor | Indicative fwd pts* | Importer | Exporter | Option cue |
|---|---|---|---|---|
| 1M | ₹0.20–₹0.35 | Use forwards; collars only if vols cheap | Partial forwards + short-dated floors | ATM strangle if vols sub-trend |
| 2M | ₹0.45–₹0.70 | Blend 2M/3M; avoid bunching | Step-up on spikes; keep participation | 1×2 seagull for exporters |
| 3M | ₹0.70–₹1.05 | Only if stress or cash-flow clustering | Cap 50–60% unless stress persists | Zero-cost collars with conservative caps |
*Fwd points bands are planning ranges; refresh with your bank quotes.
Do / Don’t for treasury
Do
- Stagger cover; match hedge tenor to cash flow
- Track realised vol and fwd points weekly
- Pre-book credit lines for spikes (same-day capacity)
Don’t
- Don’t 100% forward in Base band without trigger
- Don’t sell optionality you can’t margin
- Don’t bunch settlements at month-end without buffers