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

Currency Outlook

The USD/INR opened the fortnight at 45.48 and dipped down to touch a low of 44.97 before closing the fortnight at 45.02. A bullish stock market, international dollar bearishness, good corporate flows and benign oil prices helped rupee continue its gains against USD.

Forwards witnessed sharp rise as some liquidity pressures in the near maturities which caused short squeeze. Speculation about RBI action in its monetary policy review also helped forwards move higher. Six months spiked higher from 1.60 % to 2.40 % at the close of the fortnight. RBI hiked the repo rate by 25 bps to 7.25 % but left reverse repo unchanged at 6.0 %

In the ensuing fortnight, we expect the rupee to trade a range of 44.75 - 45.10. 6 month forward premia is expected to play a range of 2.00 % and 2.30 % with a view to receive on upticks.

Eur opened the fortnight at 1.2517 and dipped down slightly 1.2490 before moving higher to 1.2783 and closing at 1.2763.

FOMC kept rates unchanged and the accomapanying statement was perceived as dovish and so dollar was pulled down.

Yield differentials continue to drive the market. As market builds expectations of Fed cutting rates, Euro is not able to take the full benefit due to uncertainties about continued ECB hikes. The EU inflation figures are below the ECB comfort zone of 2 % .and French Finance Minister also said last week that he expects ECB to hike once more and then stay put.

Though the mid term outlook for USD is bearish, we are of the view, that in the short term, technically USD may gain some reprieve against majors. Hence in the ensuing fortnight, we expect Euro to cap at 1.2830 for a move down to 1.2660 levels.

EUR/INR is expected to be in the range of 56.65 and 57.85

GBP opened the fortnight at 1.8557 and treaded the footsteps of Eur dipping down slightly to 1.8524 before moving high to touch 1.91 on USD interest rate uncertainties. GBP closed the fortnight at 1.9080. Yield advantages seem to be favouring GBP. With inflation figures higher than the BOE target of 2 %, market seems to be expecting another hike.

In the coming fortnight, GBP is expected to cap at 1.9150 for a move lower to 1.8870

GBP/INR is expected to trade a range of 84.45 and 86.35

USD opened the fortnight at 119.70 and moved lower to 116.65 before closing near 116.90. Bank of Japan kept rates steady as core CPI figures came in less than expected and the unemployment rate was slightly higher.

In the coming fortnight USD / JPY is expected to get supported at 116.20 for a move higher to 117.80

JPY/INR is expected to trade a range of 38.00 and 38.80

 

Other News Items

Merchandise exports increased 37 % in the first half of the current year to USD 59.3 billion as compared to USD 43.2 billion in the comparable period of the previous year. Imports during April - September 2006 - 2007 recorded a growth of 32 % to USD 83.9 billion against imports worth USD 63.5 billion in the first half of fiscal 2005 - 06.

The trade deficit for the first half of fiscal 2006 - 07 (April - September 2006) was estimated at USD 24.6 billion which was higher than the deficit of USD 20.32 billion recorded in April - September 2005.

In an official statement issued, Commerce and Industry Minister Mr Kamal Nath stated that the enhanced export target of USD 125 billion envisaged for 2006 - 07 was likely to be achieved with a projected growth rate of about 22 % over last year’s performance.

The minister added that the sustained double-digit growth showed that India’s exports was on a high growth trajectory especially in the manufacturing sector.

Provisional figures show that in September 2006, exports increased by 41.19 % to USD10.3 billion whereas imports increased by 49 % to USD 15.63 billion.

Oil imports during April- September 2006 were valued at USD 28.6 billion
which was 36.83 % higher than oil imports of USD 20.94 billion in the corresponding period of the previous year. Non-oil imports increased by 10.98 % to USD 55.2 billion compared to non-oil imports valued at USD 49.7 billion during the first half of fiscal 2005 - 06.

(Courtesy:The Economic Times)

The charm of foreign shores as source of funds is getting stronger in India, with domestic firms already having raised over USD 13 billion (Rs 60,387 Crore) from global debt markets, surpassing the 2005 figure.

Riding on the back of a growing global appetite for Indian securities, rising domestic interest rates and robust, worldwide liquidity position India Inc has raised about USD 13.29 billion from overseas debt securities through August this year, with a major chunk coming through foreign currency convertible bonds (FCCBs). Indian companies raised about USD 13.16 billion (Rs 60,218 crore) in the entire 12 - month period last year.

Major companies that have raised funds abroad through FCCBs this year include Ranbaxy Laboratories (USD 400 million), Jubilant Organosys (USD 200 million), Mahindra & Mahindra (USD 200 million), India Cements (USD 75 million) and Larsen & Toubro (USD 100 million).

Besides FCCBs, other debt securities like euro bonds and syndicated loans have also seen significant growth this year. FCCBs have further cemented their position as the preferred overseas fund raising instruments and total capital raised from them could surge by about 80 % this year.

According to investment banking major Barclays Capital, companies raised about USD 5 billion through FCCBs issue in the January- August period this year, as against USD 3.9 billion in entire 2005. Funds raised through FCCBs could surge to USD 6.5 - 7 billion (around Rs 32,000 crore) this year, registering a growth of about 80 % over 2005, Barclays said. The sharp jump in Indian companies overseas fund raising was primarily driven by the need to fund their overseas expansion and acquisitions, Barclays noted.

(Courtesy: Financial Express)

Insurance offshoring revenues to touch USD 2 billion

Revenues from insurance (BPO) offshoring to India are expected to grow to around USD 2 billion by 2010 from the present USD 690 million, according to a report by research company ValueNotes. According to its report on Insurance Outsourcing, mounting cost pressures, increasingly stringent regulatory compliance and the need to differentiate product offerings will make offshoring a growing imperative for the global insurance industry.

According to the company, the global insurance industry still lags industries such as banking, financial services and telecom in terms of offshoring maturity. However insurance industry dynamics have changed rapidly in the last two to three years owing to rising natural calamities, fraud and changing consumer demographics.

The Indian offshore services provider landscape consists of captives of large insurance companies, third party vendors and joint ventures. While traditional captive and third party contracts will continue to be signed, an increasing proportion of offshore contracts are expected to move towards ‘hybrid’ operating arrangements.

The report suggests that while, traditional services such as claims processing, policy management will continue to provide volume growth to offshore BPO providers, new services such as analytics and decision support will drive value growth.

(Courtesy: Business Standard )

FCNRD(w.e.f. 01.11.2006)						NRE(w.e.f. 01.11.2006)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	5.34	5.44	3.86	4.27	6.57	6.34
2 Years & above but less than 3 years	5.17	5.37	3.94	4.24	6.47	6.17
3 Years & above but less than 4 years	5.11	5.33	3.94	4.24	6.43	6.11
4 Years & above but less than 5 years	5.11	5.27	3.93	4.27	6.45	6.11
5 years only	5.12	5.22	3.93	4.30	6.41	6.11
SB NRE - 3.50 % at par with domestic savings deposit

 

Archives

For any clarification please contact us at ibcoid@satyammail.com