If you are an exporter, shift to the euro zone. If an importer, tap the dollar countries. This seems to be the new mantra for the Indian Inc.
The continued weakness of US dollar against major global currencies is pushing Indian exporters to change to euro to get receivables.
While the rupee is appreciating against the dollar, it is depreciating vis-a-vis the Euro.
In the last one month, the Indian unit has appreciated by over one per cent to 46.85 per dollar. But it has dropped by 6.15 per cent to 54.82 against the euro. Hence, an exporter stands to get more rupees if he sells the euro as compared to the dollar.
"With the rupee hitting new lows against the euro and gaining against the greenback with every passing day, Indian exporters are increasingly shifting their billings from dollars to euros," said a leading commodities exporter.
"The rupee is losing against the euro because the European currency is gaining strength against the dollar. Exporters are shifting their invoicing to the euro.
"Clients in France and Germany had earlier wanted to transact in euros but Indian exporters did not respond. Now they are only too willing to make a little extra," said the treasury head of a large manufacturing company. In the UK, exporters are preferring invoicing in pound sterling.
But then one has to keep in mind the transaction costs on account of the two-step conversion of the euro. First the exporter's bank will have to sell the euro and buy the dollar.
Then the bank has to sell the dollars so bought to finally give its customer a credit entry to the rupee account.
Banks need to garner a minimum lot size before they actually settle a trade in foreign currency. The margins for small deals being high it becomes costlier for the exporter if he invoices in euro because of the transaction costs involved.