Friday, May 23, 2008

Unexpected question

There I was, today at 10.08 am lying in my bed, awake, thinking what my activities for today are, thinking could I sleep till 10.15am or would that be a little late for office :-) And then, I get a call from a colleague(my previous project teammate). I was quite surprised to get the call at this time and expected the call to be for a lift home or a lift to the office as she stays close to my place(and two-thirds of the time it is for this reason she calls up). FYI, she will be going to Finland this month end on an official visit. And then she asks me"Today I am meeting an agent to buy 400 euros of foreign currency. Where do you see the Euro-Rupee exchange rate going in the coming fortnight? Since I need it for the month end, Is today a good time to buy it or can I buy it after a fortnight.? " I am astonished with the question. I am not sure what to tell her. I have never followed the currency markets actively and dont have either somebody's or my own opinion on this. As a matter of fact I have viewed TV this week only on two days and that too not CVBC-TV18 or NDTV profit. So not even any passive idea about it. Even in CNBC-TV18, during the midnight shows they mostly talk about oil prices, US dollar weaknesses, but hardly ever about Euros' strength/weakness. So I gave her one of the most diplomatic answers "When even the experts cannot predict the currency movement for a such a short time, how can I" :-) After that I was thinking for some time about the concept of hedging and came up with a solution for her. Buy half your foreign currency today and the other half after two weeks. This way, you may have mitigated some risk. But the most ideal (not exactly practical way) of getting an average rate is to buy some currency daily during the period.

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