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

Currency Outlook

USD/ INR moved in a range of 43.47 - 43.67 during the fortnight with the upticks mainly due to the high oil prices and the blasts in the London subway on 07th July 2005. The rupee gradually recouped its losses against USD as the booming stock markets attract FDI inflows.

In the ensuing fortnight, we expect USD/INR to play the range of 43.40 - 43.60 with a bias to sell on upticks.

Forwards market witnessed lacklustre trading during the last fortnight with 6 month forward premia closing at 1.51 % as against the close of 1.55 % last fortnight. Monetary policy review is due on 26th July 05 with markets expecting a 25 bps hike in the reverse repo rate.

Euro touched sub 1.1900 lows last fortnight before the Luxemberg 'Yes' for EU constitution on 10.07.05 and the market worries about US trade deficit gave it a fillip to move higher. However the Eur upmove lost steam around 1.2260 levels. A slew of strong US data (better trade deficit, manufacturing index and consumer sentiment) saw Euro losing its gains and closing the fortnight at 1.2034 / 37.

In the ensuing fortnight, we expect Euro to cap around 1.2165 levels for a move down to 1.1870 levels a break of which would lead to further losses to 1.1775.
Against INR, EUR is expected to trade in the range of 51.60 to 52.90.

The blasts on 07/07/05 in the London subways saw sterling crashing to lows of 1.7310. However, cable recovered as the UK Government took swift steps to bring the situation under control. The moves were less drastic and markets came to their sense quicker as the shocks of World Trade Centre has provided the cues to deal with such calamities.

Later a higher Euro and the worries of US trade figures saw GBP make a recovery to 1.7800 levels. However higher UK unemployment figures, the market expectations about an imminent rate cut by BOE and strong US data combined to cause GBP lose much of its gains and closed the fortnight at 1.7515.

In the ensuing fortnight, we expect GBP to cap at 1.7630 levels for a test again at 1.7310 levels.

Against INR, we expect GBP to trade in the range of 75.30 to 76.70.

The USD moved in a range of 110.80 to 112.60 as USD gained much of its intial losses. Strong US data and a higher oil continued to worry yen, while the persistent speculation about a yuan revaluation continued to help it.

In the ensuing fortnight, we expect USD to get supported at 111.40 levels against JPY to test higher to 113.60.

Against INR, JPY would trade a range of 38.10 and 39.10

Other News Items

Investments into the textile sector is a prime concern for the Union Textiles Ministry as it tries to achieve the USD 50 million exports target by 2010. The sector exports USD 13 million at present. The textiles ministry has been trying to attract investments from the US, Turkey and Japan.

Investments in the sector have increased from Rs 13000 crore in 2003 - 04 to Rs 15000 crore in 2004 - 05. According to the National Textile Policy, the tetiles sector should get foreign funds to the tune of Rs 1.40 lakh crore, if it has to achieve the export target. To achieve the target, Union textile ministry is in talks with several countries for FDI. Government has allowed foreign equity participation through the automatic route in the textile sector (barring knitwear units).

The textiles sector is expected to grow by over 20 % in the current financial year as compared with last year.

The investments in the textile sector are expected to increase substantially with the Special Economic Zone (SEZ) policy and the National Foreign Trade Policy (NFTP) announced by the Central Government recently.

Source: The Economic Times

The Multi- Commodity Exchange of India (MCX) in partnership with the World Gold Council, has on 15th July 2005, launched a gold pass book scheme, thereby, making investments in pure gold easier, said Jignesh Shah, Managing Director, MCX.

The gold passbook scheme would work just like a savings bank account. The investor can now trade in 0.995 gold Cadbury of 1 kilogram each without worrying about insurance or security of the commodity. The amount will be credited or debited, as the case may be to their account with the National Security Depository Ltd (NSDL)

India, the world's largest consumer of gold, buys two-thirds of its requirement. As per the World Gold Council, India is likely to consume 800 tonne of gold in calendar 2005.

Source: Financial Express

India is the biggest buyer of re-exported goods, ahead of US and Iran, in Dubai's duty free market with electronics, jewellery and textiles forming the major items.

India topped the list in 2004 with 2.11 billion dhiram (approx Rs 25.30 billion) followed by the US (506.84 million dhiram) and Iran (497.18 million dhiram), according to an official report released by the Dubai ports and customs authorities.

The other countries in the re-export partners' list were Taiwan (334 million dhiram), Iraq (322.34 million dhiram), Yemen (314.90 million dhiram), Japan (314.26 million dhiram), Pakistan (308.81 million dhiram), Saudi Arabia (305.02 million dhiram) and Indonesia (263.97 million dhiram).

India was also the second largest exporter of goods to the Gulf city in 2004.

Source: The Economic Times

Coming as a boost to further enhance strategic and economic cooperation between India and G-8 countries, India's trade with these most industrialised nations increased by 17 % to reach USD 48 billion last fiscal, accounting for 25 % of the nation's total trade with the world, according to Phdcci. G-8 countries include the US, Canada, Italy, the UK, France, Germany, Japan and Russia.

In rupee terms, India's trade with G-8 countries rose by 15 % during 2004 - 05, a Phdcci analysis revealed.

Since India has emerged as one of the fastest growing economies of the world, many of the G-8 countries are keen to enhance their market access to the expanding Indian market. So it would be appropriate time for India to take due initiatives to consolidate its trade with the G-8 countries, said Mr K N Memani, Phdcci President.

The share of India's exports to G-8 countries constituted 33.6 % of its total exports in 2004-05, while its imports from G-8 countries has come down from 22.5 % in 2003 - 04 to 20 % in 2004 - 05 in dollar terms.

Source: Financial Express

(w.e.f. 05.07.2005) FCNRD				(w.e.f. 05.07.2005)
	USD	GBP	EUR	NRE
1 to 2 years	3.63	4.29	1.85	4.40
2 to 3 years	3.73	4.14	1.93	4.50
3 years only	3.80	4.14	2.08	4.60
3 years and above upto 5 years	---	---	---	4.60
SB NRE (w.e.f.01.07.2005) 3.70

 

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