Dollar-rupee forward premia lowest since 2011 as US-India rate gap shrinks

Indian currency's recovery since US CPI leads to reversal of onshore-offshore arbitrage

In a reflection of the narrowing interest rate differentials between the United States (US) and India, one-year dollar-rupee forward premium rates have declined to their lowest levels in 11 years, analysts said.

The plunge in forward premia, which benefits importers looking to hedge their currency exposure, has also been brought about by the reversal of an arbitrage opportunity that had sprung up in the previous month, analysts said.

On Friday, the one-year onshore forward premium rate was at 2.19 per cent, sharply lower than 2.40 per cent at the end of the previous month, Bloomberg data showed. The forward premium