Rally in dollar/rupee forward premiums may have room to run, bankers say

A three-month rally in dollar-rupee forward premiums is expected to push on amid wagers of another outsized rate cut in the United States while India's central bank moves cautiously on monetary easing, six bankers said. Forward premiums reflect the interest rate differential between the United States and India and are therefore impacted by expectations for the future path of the interest rates in the two economies. Higher premiums, which reflect a widening of the gap between the interest rates, make hedging of FX risks costlier for importers.