Many companies had built short positions through exotic deals with banks, taking a call that these currencies would fall against the dollar. Unlike stock or regular dollar-rupee trades, this is a more opaque, synthetic market where corporates punt on currencies through one-to-one deals with banks. But while these derivatives ?” sold under exotic names like target redemption notes, range accruals and options barrier ?” lower the interest outgo on loans and may even generate upfront income, corporates take a hit when the currencies start appreciating. While such naked bets are in violation of rules, corporates often hide the positions by cutting deals with multiple banks. Significantly, the present development is not exactly an outcome of any mis-selling of derivatives products by banks where the client is ignorant of the risks being taken; many corporates who have bought them to take large positions have sophisticated treasuries. read more
[Tags]corporates, currencies, deals, banks, dollar, positions, forex news[/Tags]
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