INDIAN BANK
HO/INTERNATIONAL DIVISION
66 Rajaji Salai, Chennai - 600 001
Website : www.indian-bank.com
FOREX NEWSLETTER
(FORTNIGHTLY)

MARKET OUTLOOK FOR THE NEXT FORTNIGHT

(01/04/07 - 15/04/07)

News Items

Despite a stronger dollar, gold was buoyed by much firmer oil prices and market sentiment. The yellow metal was trading at $ 663 an ounce.

From a technical perspective, analysts note that the declining volume throughout the rally from the early March lows remain a concern, but not enough to turn to a bearish view on the market. Instead, they are looking for signs of increasing volume to turn more confidently to the topside. While prices remain above $ 657-659 / oz, gold is likely to head to the $ 670 / oz area, if not potentially higher in the near-term, according to experts. Going forward, gold will continue to be impacted more by non-fundamental factors.

In other words, despite gold's fundamental balance improving, it is unlikely to be a main influence in driving current price levels higher. Instead, the future path of the dollar, oil prices and geo political developments are likely to remain key in the gold market over the next few months. The market is likely to remain choppy. Rising prices will often result in to profit raking and long liquidation, resulting in correction.

The market is getting ready for the summer driving season in the US. With the US gasoline market tightening and prices firming up, refiners are sure to commence inventory building.

The 'crack spread' - profit margin from turning crude into gasoline and heating oil - is currently trading at highs not seen since September 2005 when Katrina and Rita ripped through the Gulf. There is a strong expectation that demand for crude from profit seeking refiners will drastically pick up.

(Courtesy: Business Line )

In the light of the current macroeconomic, monetary and anticipated liquidity conditions, and with a view to containing inflation expectations, RBI has decided to:

1. increase the fixed repo rate under the LAF by 25 basis points from 7.50 per cent to 7.75 per cent with immediate effect.
2. CRR on net demand and time liabilities of banks is being increased by in two stages - 6.25 per cent from April 14, 2007 and 6.50 per cent from April 28, 2007.
3. the interest rate applicable on eligible CRR balances (ie., the amount of reserves between the statutory minimum CRR and the CRR prescribed by the RBI) shall be reduced to 0.5 per cent from the present 1.0 per cent per annum with effect from the fortnight beginning April 14, 2007.

(Courtesy: RBI website )

STEEL PRICES SEEN DECLINING IN H2 ON GLUT IN CHINA

On an analysis of factors affecting steel prices, it is observed that US steel inventories are near a record high and a glut in China, which makes 30 per cent of the world's metal, may cause prices to fall by the second half, according to UBS AG, Europe's largest bank, which cut its forecasts last month. Zurich-based Credit Suisse Group says the risks of a drop are mounting.

"The cycle has overheated", says an analyst of Credit Suisse. The Bloomberg World Iron and Steel Index has gained 55% since June 2006 as demand for bridges and skyscrapers in China, the fastest growing major economy, buoyed metal prices. The last similar rally, a 63% jump in the 10 months ended March 2005, led to a 20% decline in the index during the next four months. Shares of the world's 62 largest steel makers are trading at 11 times estimated earnings, 32% more than the average during the past two years.

Steel stocks have advanced a record 590% in the past four years. European hot-rolled coil steel prices have jumped to $520 a tonne, the same level reached before they entered a seven-month tailspin.

(Courtesy: Busuiness Line )

Students looking forward to a career in financial trading will now get a taste of the stock market floor even while they are in school. The new Financial Markets Management stream being introduced by CBSE for Classes XI and XII in the coming academic session will have a 40 per cent practical component that will include stimulated stock trading. The course is job skills oriented and provides training on software used in the stock exchange. The National Stock Exchange and CBSE will award a joint certificate at the end of the course.

Fifty eight schools across India have got the Board's approval to introduce the course that will comprise three subjects - Introduction to Financial Markets, Accounting for Business and Computer Applications. The books for Introduction to Financial Markets and Accounting for Business have been authored by BIFM and the first chapter of the Financial Markets book is already available on the CBSE's website

 

(Courtesy: Busuiness Line )

INR = RBI's announcement to hike Repo, CRR and lowering of interest on CRR will appreciate INR and push the forwards up. Market for few days might be dicey, feel range should be 42.75 to 43.50.

EUR = EUR looks bullish with support held around 1.3250 and resistance at 1.3550. Against INR, it is likely to trade between 57.30 to 58.90. The problem in US Sub-prime mortgage market hurting dollar's fortune and US rate cut expectation by 25 bps gaining momentum.

GBP = GBP also looks biddish and trading range for the next fortnight to remain within 1.9530 to 1.9840. Against INR it is likely to trade within 83.60 to 85.80. Resumption of carry trade could put GBP in the driver seat.

JPY = Range expected 116.00 to 119.20 with a downward bias. Unwinding of carry trades might help JPY to gain against USD. Against INR, JPY to trade between 36.30 to 37.80.

PS: Views expressed here are only indications. The Bank or any of it's officials will not be responsible for any consequences of any decisions taken on the basis of these indications.

FCNRD(w.e.f. 01.04.2007)						NRE(w.e.f. 01.04.2007)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	4.97	5.61	3.93	4.05	6.46	5.72
2 Years & above but less than 3 years	4.77	5.51	3.99	4.03	6.36	5.52
3 Years & above but less than 4 years	4.71	5.46	3.99	4.02	6.34	5.46
4 Years & above but less than 5 years	4.72	5.42	3.99	4.04	6.35	5.46
5 years only	4.76	5.37	3.98	4.07	6.31	5.46
SB NRE - 3.50 % at par with domestic savings deposit

 

Archives Please CLICK HERE for viewing FX News Letters of Previous Years

For any clarification please contact us at ibcoid@satyammail.com