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

(16/05/07 - 31/05/07)

News Items

The southwest monsoon has set in over parts of southeast Bay of Bengal, the Nicobar Islands and the Andaman Sea on Thursday, at least eight days ahead of schedule. The India Meteorological Department said in its update that conditions were favourable for its further advancement over some more parts of Andaman Sea and southeast bay of Bengal.
The Bay of Bengal arm of monsoon normally breaks around May 18-20, followed 10-12 days later by the counterpart Arabian Sea arm along the southwest coast of the mainland.

Benchmark Australian spot thermal coal prices have fallen to about $52 a tonne, the lowest since late March, on dwindling demand as more buyers shun Australian coal due to severe congestion at its ports. Thermal coal, used for power generation, fell $ 2.37 from a week earlier to $ 52.22 per tonne.

There were no trades at that price and industry sources said the recent fall in prices was largely due to slackening demand for Australian thermal coal as buyers were unwilling to send ships to line up at the ports, incurring added freight costs. China is likely to cut coal exports further and that means Asian buyers would have to rely more and more on Australian, Indonesian and even Russian coal.

Industry sources said while Australian coal prices have fallen, Indonesian coal prices have jumped as Asian buyers turn to Kalimantan for supplies. Indonesian coal prices have also seen upward pressure as several coal producers declare force majeures due to production cuts in East Kalimantan. Indonesian coal producers and exporters have been saying that stocks at the ports and loading points have recoiled to a minimum due to heavy shipping schedules and the impact of heavy rains on production.

According to an April 30 report by UBS AG, Indonesia's coal exports growth may slow sharply in the coming years, further tightening the Asian coal market at a time when demand for the fuel is expected to be accelerating.

IT EXPORTS UP BY 39.05%

IT exports have touched $ 36.65 billion, reporting a growth of 39.05 per cent for the year ended March 2007 as per the estimates of Electronics and Software Export Promotion Council. This includes electronics hardware, software and services.
While exports from computer software and services increased to $ 24.27 as against $16.9 billion in the previous year, registering a growth of 40 per cent, ITES exports rose to $ 9.4 billion up from $ 6.78 billion recording a growth of 36.67 per cent.

In the electronic hardware category, exports grew by 29.87 per cent to $ 2.89 billion as against $ 2.17 billion in the previous year. The estimates are based on exports of electronic hardware, computer software and services and ITES. In percentage terms, growth has been significant at 38.28 per cent in April - March 2007. Industry sources are optimistic about solid growth in IT exports in the next fiscal end going by the present trend.

TEA EXPORT TARGET SET AT 210 MKG

The target for the current year's tea exports has been set at 210 million kg (mkg). Last year, India exported 203 mkg of teas, against the target of 200 mkg. The current year's thrust market will be Egypt, Pakistan and Iran. Last year, exports to Egypt were 2.7 mkg, likely to be anything between 6 to 10 mkg this year. The tea trade was bullish about exports to Pakistan, which imported an estimated 15 mkg last year. In medium to long terms, the shipments to Pakistan should rise to 20 to 25 mkg.
There was a proposal to have India Tea Trade Centre in Pakistan on the line of the center being planned in Egypt. Tea exports to Iran last year were of the order of five mkg, likely to rise by another 2.5 to 3 mkg this year.
Though Iraq was a major buyer of Indian tea at 42 mkg last year, Iraq had proved to be a difficult market for a variety of reasons and there were problems in getting payments for the shipments. However, attempts were being made to circumvent the problems as far as possible.

INR = INR in the ensuing fortnight likely to trade within 40.50 and 41.40. Selling on rallies preferred. FC inflows and rate hike possibility both combined will help INR to strengthen.

EUR = EUR looks mildly bearish and might move between 1.3750 and 1.3390. ECB's rate hike by 0.25% by June has been discounted by the market. Selling on rallies preferred. Against INR range expected 54.20 to 56.90.

GBP = GBP also looks bearish and might trade between 1.9880 and 1.9550. Selling on rallies preferred. Further rate hike possibility in GBP is ruled out at the moment. Against INR range expected 79.59 to 82.30.

JPY = Flourishing carry trade and lower yields have kept JPY weak. Range expected 119.30 to 122.00. Buying on dips suggested. Against INR range expected 33.30 to 34.70.

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.

FCNR (B) DEPOSITS (w.e.f. 01.05.2007)						NRE(w.e.f.01.05.2007)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE TERM DEPOSITS
1 Year & above but less than 2 years	4.55	5.23	3.55	3.68	5.82	5.30
2 Years & above but less than 3 years	4.31	5.12	3.64	3.69	5.75	5.06
3 Years & above but less than 4 years	4.26	5.08	3.64	3.71	5.76	5.01
4 Years & above but less than 5 years	4.26	5.03	3.64	3.72	5.79	5.01
5 years only	4.29	4.98	3.64	3.74	5.77	5.01
SB NRE - 3.50 % at par with domestic savings deposit

 

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