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

Currency Outlook

USD/ INR moved down during the fortnight from a high of 43.81 to 43.58 as stock market inflows lent strength to the rupee though USD. INR was also comforted by the comments of RBI Governor that he did not see excessive speculative activity in the financial activity.

In the ensuing fortnight, we expect USD/INR to trade the range of 43.40 - 43.75. While the consolidation of EUR and GBP against USD would augur well for INR also, higher oil prices and the resulting wide trade deficits is a matter of concern.

Six month premia closed the fortnight at 1.58 %. We expect the six month premia to play the range of 1.35 - 60 % in the ensuing fortnight with a preference to receive on upticks.

A resounding NO by Netherlands for EU constitution worried Euro. Comments of Italian Health Minister favouring a revert back to Lira also bothered Euro. The single currency made a feeble push up to 1.2365 before continuing its downward journey to touch lows of 1.2020 before gaining some respite.

EU summit at Brussels on 16/06/05 and 17/06/05 is set to deliberate thorny issues of EU Budget for 2007 - 2013 and the ratification of the EU Constitution. FOMC is due on 30th June 2005. Market has discounted a Fed hike of 25 bps. Recent US inflation figures have been tame which raises the question as to how long can Fed continue its rate hikes.

In the ensuing fortnight, we expect Euro to be supported at 1.2020 levels for move upto 1.2370 levels. We expect the recent USD negative news like lower capital flows, negative growth in retail sales and lackluster sentiment indices to stage the set for Euro recovery.

Against INR, EUR is expected to trade the range of 52.30 and 53.80.

GBP started the last fortnight at 1.8171 and moved up to a high of 1.8410 as Fed Reserve Dallas Governor indicated that Fed rate hikes may be coming to an end. However lower UK house prices and tepid growth in UK retail sales took the wind out of GBP which followed the footsteps of Eur down to 1.8000. BOE kept the rates steady at 4.75 %.

In the ensuing fortnight we expect GBP to be supported at 1.8050 levels for a move upto 1.8460 levels in a correction to the recent downtrends.

Against INR, we expect GBP to trade the range of 78.70 and 80.40.

USD got supported at 106.60 levels against JPY during the last fortnight and scaled new highs of 109.70 before closing the fortnight at 109.25 levels. Positive growth scenario fuelled at last by local consumer spending and huge current account surplus have been comforts for yen while higher oil price is a worry.

In the ensuing fortnight, we expect USD/JPY to cap around the recent highs of 109.80 and move down to 106.80 levels.

Against INR, JPY would trade a range of 39.70 and 40.70.

Other News Items

The Leather Industry, hailing the new duty draw back rates announced by the Government, is now upbeat about achieving a leather products export target of $4 billion by 2010. The current exports stand at $2.1 billion. The revised drawback schedule of items reflects an overall increase in rates for leather and its products, including non-leather footwear. According to Mr. M. Rafeeque Ahmed, Chairman of the council for Leather Exports, who expressed satisfaction over the hike in ceiling to realistic levels in several items, the new rates would considerably neutralize the duty incidence suffered by the critical inputs. This will provide a better competitive edge for Indian products in the international market. The footwear items have now been categorized on the basis of French point sizes for adults and children without gender specifications.

He also said the council had stressed on the need to adopt holistic procedures for determining new rates, in keeping with the status of the industry and its future potential for growth, both in export as well as employment generation.

Source : The Financial Express

India’s software and services exports exceeded expectations and registered a 34.5 % growth to clock revenues of $17.2 billion in 2004-05, Nasscom’s annual survey on the performance of the Indian IT-ITES industry said. Nasscom had projected 30 to 32 % growth for 2004-05 from $12.8 billion in the previous year. Nasscom president Mr.Kiran Karnik said, of the total exports, the US accounted for 68% , Europe 24-25%, Asia pacific 5% and the rest of the world 3%. Of the total IT-ITES exports in 2004-05, IT software and services grew by 30.5%, registering revenues of $12 billion; while ITES-BPO segment clocked revenues of $5.2 billion, a growth of 44.5%. According to Nasscom findings, the overall Indian IT-ITES industry (including domestic market) grew by 32% in 2004-05, registering revenues of $22 billion, up from $16.7 billion the previous year. The total value of outsourcing to India ($17.2 billion in 2004-05) is estimated to be 44% of the world wide total according to Nasscom.

Source : The Financial Express

China, a major producer of leather products and goods for the global market, has emerged as a major destination for Indian finished leather, accounting for almost 46% of the nearly Rs 2,600 crore worth of finished leather exports from this country. Italy, which earlier used to be the prime market for Indian finished leather, today finds itself a distant second accounting for a mere 11% of the exports, Germany is ranked third with a share of 5%. India is major source for raw hide (animal skin), the basic raw material. This is further refined to obtain finished leather (in the form of sheets),which is used to make leather products and goods including garments, footwear and hand bags amongs others. As per data available for the year 2003 USA imported leather footwear to the tune of $80.64 million from India, The same year, its leather footwear imports from China was $6.4 billion. China has today emerged as the biggest production centre for leather goods and products in the world. India exported finished leather of about Rs1166.30 crore to China during 2004-05 against Rs 1015.35 crore during 2003-04 registering a growth of almost 15% over the previous year. Significantly, exports to Italy during the same period declined by almost 28%. Incidentally, even a couple of years back, Italy ( 30% ) and Germany(15% to 18%) were accounting for over 45% of Indian finished leather exports. This indicates the speed at which the Western countries are losing out to China, as more and more players from these countries are transferring the manufacturing activities to China and Vietnam.

Source: The Economic Times

Exports of coir and coir products from India touched an all time high level of 1,22,927 tonnes valued at Rs 473.49 crores in 2004 - 05. This represents an increase of 20 % in terms of quantity over the exports achieved in 2003 - 04.

The export value recorded a 16 % increase over the previous year. During 2003 - 04, exports of coir and coir products were 1,02,253 tonnes valued at Rs 407.50 crore. The exports during the current year surpassed the target of Rs 450 crore.

Coir doormats, which showed an upswing to the tune of 22 % in export value constituted the major item of export from the country accounting for a share of 47 % in total exports. The export of coir doormats was 58,063 tonnes valued at Rs 355.59 crore as compared to 49103 tonnes and Rs 291.65 crore in the previous year.

Coir yarn and semi-finished raw material exported from the country recorded a decline of 11 % compared to the previous year. In the case of coir rugs and carpets there was a slight increase in terms of quantity although it declined in terms of value.

Exports of coir pith has recorded significant increase both in quantity (49%) and value (54%) when compared to exports during the previous year. Exports of coir fibre during 2004 - 05 amounted to 1350 tonnes valued at Rs 1.86 crore, which represents an increase to the tune of 20 % in value over the previous year’s exports of 1121 tonnes and Rs 1.42 crore.

(Source: The Economic Times)

(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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