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 43.49 - 43.53 during the first few days of last fortnight before gaining rapidly to 43.10 /13 levels due to Chinese revaluation of Yuan from 8.27 to 8.11 on 21.07.05. However, sustained bids reportedly from Nationalised Banks saw rupee shedding all its gains and moving back to 43.50 levels on 22.07.05. Subsequent trading has been range bound between 43.46 - 43.57 with the underlying sentiment being bullish for rupee.

In the ensuing fortnight, we expect USD/INR to move in the range of 43.30 - 60 with a bias to sell on upticks.

Forwards market witnessed some good receiving interest due to yuan revaluation and the no rate change stance by RBI. Six month premia closed the fortnight at 1.12 % compared to 1.51 % last fortnight. In the ensuing fortnight we expect six month forwards to move in the range of 1.05 % and 1.25 %.

Euro witnessed two way movement during the fortnight. Better US industrial production and trade deficit data saw Euro testing 1.1961 again. Later Yuan revaluation provided impetus for Euro to move higher and test 1.2250 levels before winding down to 1.2125 as market positioned for US second quarter GDP data which came out a tad lower than expectations.

In the ensuing fortnight, we expect Euro to be supported at 1.2070 levels for a move higher targeting 1.2370.

Against INR, EUR is expected to trade in the range of 52.45 to 53.75.

GBP more or less followed the footsteps of Euro but the downside moves were accentuated with worries about terrorism in London and possible rate cut by BOE. However, GBP showed resilience by bouncing back to close the fortnight at 1.7577. A lower than expected US GDP data helped the GBP upmove.

In the ensuing fortnight, we expect GBP to get supported at 1.7460 levels for a move higher to 1.7780.
Against INR, we expect GBP to trade in the range of 75.85 to 77.25.

Jpy made the highest gains on yuan revaluation gaining from 112.80 to 109.90 levels but could not hold on to them as USD bounced back with higher interest rates and expectations of rate hike proving to be definite attractions for USD. However sentiments favour Jpy in the short term as markets still remain bullish on asian currencies.

In the ensuing fortnight, we expect USD to get capped at 113 levels against yen and move down to 110.70 levels.

Against INR, JPY would trade in a range of 38.45 and 39.25

Other News Items

Ginger export market is on an upbeat mood though supply to terminal market is very limited. Exporters said demand is high from Gulf countries and traders there are stocking up the product for the Ramzan season.

However, fresh arrivals have entirely stopped in the Kochi market and traders fear that dried ginger would not be available in the market in September. The ready-to-export quality ginger is available at a price of Rs 14,000 per quintal and even medium quality ginger is fetching a price above Rs 12,000.

Those who have export commitment are seeking ginger from the growing areas but good quality product is not available due to the ongoing monsoon season. Next production season will commence only in October-end and increase in production is widely expected. However, according to growers, production would be lower than expected levels due to heavy rains in the growing areas that have caused damages to the crop.

Traders also said dried ginger will fetch higher prices during the next season due to higher demands. Total exports in April-June 2005 was 1,325 tonne at Rs 8.87 crore.

(Source: Financial Express)

Indian textile exports to US have made impressive gains. In the month of May alone, India has recorded an export value of USD 377 million to the US, which is much higher than USD 265 million recorded last May ’04. That is a jump of 42 %. For the year so far, India has received USD 1962 million from textile exports to the US. India has seen a 30 % growth in textile exports to the US for the year, as compared to the same period last year.

Among the different textile export categories, readymade garments have recorded a 19 % growth in the period, cotton, yarn and fabrics have recorded a 7 % growth in the period, man-made fabrics have recorded a 11 % growth, wool and wool products have recorded a 87 % growth, and jute has recorded a 38 % growth for the period.

The textile sector plays an important role in the Indian economy, as it is an important contributor to the GDP in India. It has a 25 % weight in Industrial production. It contributes as much as 15 % to overall export earnings while it also adds employment worth Rs 9.3 crore.

Indian textile exports is expected to get a further boost with the revaluation of the Chinese currency, yuan, as it would make the exports from China costlier. China at present is the lead country in terms of textile exports to the US with earnings of USD 8163 million so far in this year.
(Source: Economic Times)

The recent withdrawal of export benefits to cashew under the ‘Vishesh Krishi Upaj Yojna’ (VKUY) scheme is likely to have a negative impact on its exports.

Under the amended Exim policy, cashew had been included in the Minor Forest Produce, qualifying it for benefits as per para 3.8.2 of ITC (HS) classification of export and import items. But, a subsequent public notice No.4 dated April 27, 2005 has deleted cashew from the list, depriving this benefit to cashew.

According to the Cashew Export Promotion Council of India (CEPC), VKUY (Special Agricultural Produce Scheme) has been introduced to promote exports of fruits, vegetables, flowers minor forest produce and their value added products by giving incentives to the exporters of such produce.

Under the scheme, exporters of such products were entitled to duty credit scrip equivalent to five per cent of the f.o.b value of exports for each licensing year from April 1, 2004. Besides, the scrip and items imported against it would be freely transferable.

Partly because of this facility, in 2004-05, cashew kernel exports had touched a record 1,26,667 tonnes valued at Rs 2709.24 crore as against 1,00,828 tonnes valued at Rs 1,804.43 crore in 2003-04. Imports of raw nuts were also the highest last fiscal with 5,78,884 tones valued at Rs 2,183.26 crore against 4,52,398 tonnes valued at Rs 1,400.93 crore the previous year. The industry has to depend on imported raw materials as indigenous production continues to remain far below the demand.

Anticipating these benefits from April 1 last year, the industry sources said they had taken steps to push up exports at competitive prices in the world market besides making imports of raw materials at higher prices. Following the deletion of cashew from the list, the processor-exporters now apprehend that they would be deprived of this benefit for the last fiscal. They said it would have a negative impact on the competitiveness of Indian Cashew in terms of value in the overseas markets.

The with-drawal of export benefits has come at a time when Vietnam cashew industry, supported by its Government, is fast emerging as a serious threat to Indian cashew.

(Source: Business Line)

India is all set to become one of the top ten global pharmaceutical markets. With a rapidly growing population and tax concessions for overseas investors, India will dominate the world pharma market in the coming years, according to a latest report by Pricewaterhouse Coopers. A slump in the traditional pharmaceutical markets of North America, European Union and Japan will also aid growth in India. Already a growing number of foreign multinationals have been attracted to India. Tax holidays for companies based in underdeveloped areas and a great potential for sourcing of pharma ingredients have also been a big lure. Relaxing of pricing controls in India within the last ten years coupled with strong manufacturing expertise provide an attractive proposition for big pharma companies. The US Food and Drug Administration has already approved 60 manufacturing sites in India, which is more than any other country outside the US. India’s native manufacturers pose a great threat to western generic companies. It currently produces 20 % of the world generics.
(Source: Financial Express)

(w.e.f. 05.07.2005) FCNRD				(w.e.f. 02.08.2005)
	USD	GBP	EUR	NRE
1 to 2 years	3.63	4.29	1.85	4.70
2 to 3 years	3.73	4.14	1.93	4.90
3 years only	3.80	4.14	2.08	5.00
3 years and above upto 5 years	---	---	---	5.00
SB NRE (w.e.f.01.07.2005) 3.70

 

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