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

Currency Outlook

USD/ INR moved higher from 43.41 and closed the fortnight at 43.76 levels due to global strengthening of USD amidst continued rate hike hopes and abating of Chinese yuan revaluation rumours. Outflows from local stock market also contributed to the weakness of INR.

For the ensuing fortnight we expect INR to trade in the range of 43.60 and 44 as USD is expected to continue in its strength after some consolidation. Forwards came down partly on cash squeeze and export covering prompted by a higher spot. Six month premia now is a nominal 0.82 %.
For the ensuing fortnight we expect six month premia to move in the range of 0.60 % - 0.90 % with a bias to receive on upticks.

 

Euro moved down from 1.2685 to 1.2325 levels during the fortnight on expectations of French ‘Non’ to the EU Referendum. As expected, France voted negatively. Next vote in Holland on 01.06.05 is also expected to be negative. With the economic growth also slowing down in the Eurozone, there seems to be a lack of positive news for the Euro at the moment.

In the ensuing fortnight we expect Eur to get supported at 1.2210 levels and move upto 1.2460 levels before getting sold off again targeting 1.2115 level.

Against INR, Euro is expected to trade a range of 53.20 and 54.30

GBP also suffered alongwith Euro moving down from 1.8515 levels to 1.8125 levels before getting a slight breather. In the ensuing fortnight we expect GBP to get supported at 1.8050 levels for a move upto 1.8370 before the selling sets in again targetting futher lows of 1.7845.

Against INR, GBP is expected to trade a range of 78.50 and 79.90.

 

USD gained against JPY last fortnight moving higher from 107.28 to 108.86 levels. The move has not been more pronounced due to the residual yuan bullishness and a higher than expected GDP growth number for Japan for the Jan - Mar 2005 quarter.

In the ensuing fortnight we expect USD to get capped at 109.00 for move down to 106.90 against JPY.

Against INR, JPY is expected to trade a range of 40.00 and 40.80.

 

Other News Items

The Government is targeting merchandise exports from India at $92 billion in 2005-06,up from $80 billion in 2004-05,and will work towards achieving this growth by boosting trade to eastern Europe and Asian countries. India expects to boost exports by 20% in the year ending March 31st,2006 by shipping food products and leather goods to countries of the former Soviet Union and Asia, apart from more textiles, gems and jewellery to the US, India’s biggest export market. The Indian Government wants to export goods worth $92 billion in this fiscal year, more than the $88 billion forecast earlier to sustain industrial growth . India’s exports rose 17% in April to $6.56 billion. Imports rose 51% to $10.42 billion in the same month widening the trade deficit to $3.8 billion from $1.2 billion a year earlier. According to Mr. Kamal Nath “Trade deficit” is not a cause for concern because sectors like manufacturing, exports and even the overall economic growth is not showing any signs of slowing down. The Government is planning to phase out agricultural subsidies in accordance with WTO norms. “India would not completely phase out agricultural subsidies till the market access issue with “western countries” is sorted out.

Source : The Financial Express

India launched a determined bid to diversify its export basket to china by roping in major corporates, including L&T, TCS, NIIT and Ranbaxy to showcase their technological prowess in the world’s most dynamic market.

‘ India Day’, the largest-ever of its kind organized by the Indian embassy here, was inaugurated as part of a major trade exhibition in Chengdu, capital of south -west China’s Sichuan province, which is emerging as a key information technology hub of china. The Indian companies which are taking part in the fair organized by CII include L&T, NIIT, TCS, i -GATE solutions, SBI, Air India and Ranbaxy, all of whom have established bases in China. During the seminar, Chinese enterprises were given a briefing on the Indian Economy and the potential for mutually beneficial co- operation.

While acknowledging the positive momentum in India -China bilateral trade, industry experts said both countries need to examine its various parameters closely, particularly the narrow composition of the trade basket and the insufficient use of each other’s comparative advantages. According to latest Chinese trade statistics, Sino-India bilateral trade during the first quarter of 2005 touched $4.46 billion, up 42.4 % compared to corresponding period last year.
Source : The Financial Express

The proposed diamond exchange in Mumbai will follow the Belgium model, The famous Diamond Club in the Belgium city of Antwerp is viewed as a benchmark for the Mumbai trading centre. But for that to happen the government needs to remove the existing 5% import duty on polished diamonds, industry officials say. The current import duty on diamonds often acts as barrier for Indian diamond jewellery manufacturers. Many diamond trading countries have no import duties on diamonds. Thus re-export of polished diamonds after value-addition from India becomes uncompetitive. The government will provide the infrastructure for the first ever diamond trading centre (DTC) in India though the centre will be managed by private funds. Once DTC starts working ,then trades will become centralized and a new spot market will evolve. Antwerp is the richest city in Belgium. Mumbai also has a rich tradition of jewellery making and is the financial capital of India. Zaveri Bazaar has emerged as a gold trading hub in India. Traders are optimistic that once DTC starts operations, brokers will meet in Mumbai, instead of in London. India exported $1181.48 million (provisional estimate ) worth of diamonds during 2004-05.

Source: The Economic Times

Indian companies are making a killing at the Natural Restaurant Show, the largest food service event in North America attended by over 75000 industry professionals from 140 countries. Of the various products on display by Indian companies, IQF mushrooms are finding increasing acceptance by the Americans. Himalya International Ltd., pioneer in the exports of IQF mushrooms and vegetables having its own mushroom cultivation in backward hilly state of Himachal Pradesh has received an order worth $1.2 million from Cohen Foods, USA one of the largest wholesale food - chains in America. It is the first company to have introduced mushroom stuffed samosa in the US market. It also plans to launch frozen mushroom soup later this year. Himalya has recently also bagged an export order of Rs.40 million for specialty mushroom products. Currently besides Himalya International, there are only two major exporters of canned mushroom, namely Flex Foods and Ponds Ltd, and five new companies have entered the market recently. Countries like Switzerland and USA have ranked as comparatively consistent importers of canned mushrooms from India in the recent years. Germany and USA imports canned mushroom, accounting for about 40% and 19% respectively of the world imports .

Source : The Financial Express.

(w.e.f. 04.06.2005) FCNRD				(w.e.f. 04.06.2005)
	USD	GBP	EUR	NRE
1 to 2 years	3.53	4.52	1.93	4.30
2 to 3 years	3.70	4.36	2.08	4.50
3 years	3.79	4.34	2.25	4.55
SB NRE (w.e.f.01.04.2005) 3.40

 

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