BNY Sees Indian Rupee Hedging Demand Rising on Bond Gains

Indian bonds have outperformed major peers, leading to increased foreign-exchange exposure for investors. With overall INR flows broadly flat, the rise in relative bond values has pushed hedgers to reassess positions.

From a rebalancing perspective, the rupee now faces strong selling pressure, according to BNY’s Geoff Yu. As a result, the bank advises investors to keep hedging elevated after the strong duration gains.

The shift highlights how fixed-income outperformance can mechanically create FX hedging needs, even when spot flows remain muted.