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

MARKET OUTLOOK FOR THE NEXT FORTNIGHT

(01/08/2007 - 15/08/2007)

News Items

> Bank Rate kept unchanged.

> Reverse Repo Rate and Repo Rate under LAF kept unchanged.

> Withdrawal of the ceiling of Rs. 3,000 crore on daily reverse repo under the LAF with effect from Monday, August 6, 2007.
The Reserve Bank, however, retains the discretion to re-impose a ceiling as appropriate. The second LAF, conducted between 3.00 p.m. and 3.45 p.m. on a daily basis, is withdrawn with effect from Monday, August 6, 2007.

> Cash Reserve Ratio to be increased by 50 basis points to 7.0 per cent with effect from the fortnight beginning August 4, 2007.

> GDP growth projection for 2007-08 retained at around 8.5 per cent, barring domestic or external shocks.

> Holding inflation within 5.0 per cent in 2007-08 assumes priority in the policy hierarchy, while reinforcing the medium-term objective to condition policy and perceptions to reduce inflation to 4.0-4.5 per cent on a sustained basis.

> While non-food credit growth has decelerated, the acceleration in money supply and reserve money warrants an appropriate response.

> Recent financial market developments in India and potential uncertainties in global markets warrant a higher priority in the policy hierarchy for managing appropriate liquidity conditions at the current juncture.

> Barring the emergence of any adverse and unexpected developments in various sectors of the economy and keeping in view the current assessment of the economy including the outlook for inflation, the overall stance of monetary policy in the period ahead will broadly continue to be:

* To reinforce the emphasis on price stability and well-anchored inflation expectations while ensuring a monetary and interest rate environment that supports export and investment demand in the economy so as to enable continuation of the growth momentum.

* To re-emphasise credit quality and orderly conditions in financial markets for securing macroeconomic and, in particular, financial stability while simultaneously pursuing greater credit penetration and financial inclusion.

* To respond swiftly with all possible measures as appropriate to the evolving global and domestic situation impinging on inflation expectations, financial stability and the growth momentum.

(Source: RBI website)

Skies over Northwest Bay of Bengal are shaping up to host a cyclonic circulation which is expected to descend to lower levels and lead to the revival of south-west monsoon. The latest available medium-range outlook by the Department of Science and Technology clearly favours formation of the system around August 4. The axis of monsoon trough is likely to shift southwards from Thusrday, the India Meteorological Department said in its update. The axis is currently aligned along the Himalayan foothills indicating the "break monsoon" phase. The Andhra Pradesh-Orissa coast could be the most likely area for the depression to make a landfall. A likely west-north west course could take the system into central India by when the westerly flows would have peaked, bringing the whole of interior peninsula under its influence.

( Source: Businessline)

47,500 TONNES SHORTFALL SEEN IN GLOBAL PEPPER SUPPLY

Global pepper supply this year is estimated at 329,000 tonnes, a deficit of 47,500 tonnes, against projected demand of 376,500 tonnes. Of late, increased industrial use is pushing up the demand for pepper in the world market at a time when the world output has been showing a declining trend due to erratic weather and diseases, according to recent reports from Indonesia and Vietnam.

Consumption of pepper by the food industry in China, Russia and India is on the increase, the report said. Meanwhile, industry sources in Indonesia were quoted as saying that its pepper production next year would drop by 57 per cent to 15,000 tonnes due to unfavourable weather conditions there. They said that Indonesian output this year is estimated at 35,000 tonnes, compared with 30,000 tonnes last year, mainly because of good carryover stocks. Production in Brazil, where the current crop harvesting is spread from July to October is estimated at around 40,000 tonnes, a report from Brazil said. According to reports from Hanoi, the output this year in the world's top producer, Vietnam , is estimated to be around 90,000 tonnes, as against one lakh tonne last year, due to unfavourable weather and diseases.

( Source: Businessline)

INDIA REQUIRES 911 AIRCRAFT IN 20 YEARS AT $86 bn: BOEING

The US based aircraft manufacturer Boeing esitmates India would require 911 aircrafts valued at $86 billion over the next 20 years. The latest estimates were an increase from the projection made last year of the country needing 856 aircraft valued at $72 billion over a 20 year period. The robust economic growth increased the demand for air travel both domestically and internationally and the ongoing efforts of the industry to reduce cost has changed the projections about the number of aircraft India needs over the next 20 years. The aircraft would be needed for both as replacement and also to meet growth in the market. The largest increase in the outlook during 2007 has been in the twin-aisle category with Boeing estimating that India needs 173 such aircraft over the next 20 years up from 120 such aircraft predicted in the previous year.

( Source: Businessline)

INR = INR looking for gradual appreciation under central bank supervision. Range expected 39.90 to 40.70. Besides, USD weakness and FII inflows will help INR to firm up.

EUR = EUR in a corrective consolidation. Range for the fortnight likely 1.3550 to 1.3880. Against INR rate likely to move between 54.40 to 55.80.

GBP = GBP also in the mode of corrective consolidation and range expected for the ensuing fortnight 2.0120 to 2.0520. Against INR rate likely 81.20 to 82.80.

JPY = JPY looks range to slight bearish. But carry trade might resurface which will weaken Yen. Range expected 117.50 to 121.50. Against INR rate likely 33.10 to 34.10.

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. 01.08.2007)						NRE(w.e.f.01.07.2007)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE TERM DEPOSITS
1 Year & above but less than 2 years	4.50	5.54	3.79	4.14	6.14	5.25
2 Years & above but less than 3 years	4.42	5.46	3.90	4.23	6.17	5.17
3 Years & above but less than 4 years	4.46	5.45	3.92	4.29	6.20	5.21
4 Years & above but less than 5 years	4.54	5.42	3.93	4.33	6.25	5.21
5 years only	4.61	5.37	3.94	4.36	6.23	5.21
SB NRE - 3.50 % at par with domestic savings deposit

 

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