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

Currency Outlook

USD/INR opened the fortnight at 43.9275/9325 and traded in the range of 43.8425-44.0850, before closing at 44.0125/44.0150. Higher oil prices due to new tropical storm - Rita , corrections witnessed in BSE index and the global pro-dollar sentiment, made Rupee weaker, which closed above 44.00 levels.

For the ensuing fortnight, Rupee may stay well supported at 43.86 and 43.94 levels and may attempt to break the previous recent high of 44.1825 levels.

6 months forwards traded in the range of 0.60 pct to 0.89 pct during the last fortnight. If rupee remains weak, we expect exporters to off-load their holdings as the USD inches up and hence forwards will move southwards. So the recent highs of 0.90 pct may cap for 6 months forwards which may test lower of 0.50 pct.

Euro opened the last fortnight at 1.2289 and capped at 1.2310 before moving down against USD as the German elections proved indecisive. USD continued its gains as FOMC hiked the rates by 25 BPs to 3.75 pct and the talk by FED officials on ‘inflationary pressures’ gave an impression of further rate hikes. Better than expected US jobless claims also helped USD and the EURO tested a low of 1.1979 before closing the fortnight at 1.2024 -27.

In the ensuing fortnight, we expect Euro to be supported at 1.1980 for a move higher to 1.2150 levels as the last week’s price action shows indecisiveness after the recent down move. However, a clear break of 1.1980 levels would cause more euro losses to 1.1850/1.1760 levels.

Against INR, EUR is expected to trade in the range of 52.20-53.50

Cable opened at 1.8243 and moved in a range of 1.7563-1.8245, mirroring the sentiments in favour of dollar. Weak consumer spending in UK, slicing of estimated GDP growth for 2005 of UK from 2.0 pct to 1.7 - 1.8 pct, did enough damage for GBP to retrace to key pivotal level like 1.7650. Economists forecast a higher than expected slow down in British economy and there is room for rate cut in November. These factors have accentuated GBP down move.

In the ensuing fortnight, GBP is likely to be capped at 1.7822 levels and may move test lower levels like 1.7336

Against INR, we expect GBP to trade in the range of Rs.76.35 - 78.50.

During the last fortnight, USD opened at 110.33 against JPY and traded in the range of 110.18 - 113.70. Higher oil prices are seen by some in the market as a threat to the economy in Japan, which depends on imports for its oil needs. Announcement of china to allow yuan to range as much as 3.0 pct a day against non-dollar currencies such as yen and Euro instead of 1.5 pct, added further volatility to USD/JPY.

In the ensuing fortnight, we expect USD/JPY to find its support at 112.08 levels and will attempt to test the resistance levels at 113.74/114.93

Against INR, JPY would trade in a range of 38.30 - 39.30

Other News Items

Tobacco exports from the country touched 39,345 tonne worth Rs 313.56 crore (USD 71.85 million) in the first quarter of the current fiscal. The exports include 35,030 tonne of unmanufactured tobacco (Rs 245.01 crore) and 4,315 tonne of tobacco products (Rs 68.55 crore) as per Mr P Dayachari, Chairman, Tobacco Board. The last year’s exports were of the tune of Rs 1,362.18 crore (162,933 tonne).

Auctions in Karnataka have entered the third week with aount 4 million kg of the estimated 85.06 million kg auctioned so far at the 10 platforms of the Board. While the crop authorized for Karnataka farmers was 75.62 million kg, they are expected to reap for the present 10.56 million kg of unauthorized tobacco.

The tobacco crop size has been fixed at 131.5 million kg for farmers of Andhra Pradesh for 2005 - 06. Farmers are still raising nurseries and carrying out transplantations. According to information from farmers of the norther light soils (NLS) in East Godavari district, 25 per cent of nurseries raised in 280 hectares has been washed out by the cyclone.

The auctions are conducted in Karnataka in September while in Andhra Pradesh they are conducted in January. In order to advance auctions in Andhra Pradesh from January to November the Board has taken up an experimental programme asking the farmers of southern light soils (SLS) in Prakasam and Nellore districts to advance transplantations by two months in about 6,000 hectares. About 1,560 tobacco curing barns come under this programme. The board deputed its experts to guide farmers from plantation stage to harvest and pre and post curing stages.

Courtesy: Business Standard

The top five outsourcing destinations in the World are India, Canada, China, Poland and Ireland, according to a survey by neoIT, a global outsourcing advisory firm.

India and Canada continue to top the list for four years in a row. But in terms of annual BPO exports Canada beats India. Canada’s BPO exports last year 2343 USD 5.5 billion as compared to usd 5.2 billion of India But in IT exports India is the big daddy of all with USD 12.2 billion of exports last year.

The five factors taken into account while ranking are financial benefits, service maturity, people, infrastructure and catalysts like government support and political environment. While India continues to lead in terms of talent pool, it lags only behind Canada in service maturity and IP protection. Though India lags behind in terms of financial benefits and catalyst for BPO, India’s combined score for all five factors is higher than any other country in the world.

The only country posing a serious threat to Indian supremacy is China. But China lags miles behind India for process maturity and English language capabilities.

Source: Financial Express

The textile ministry has introduced a scheme for setting up new facility centres. Under the scheme, the government will provide a maximum of Rs 24 lakh or 40 % of the total cost a project. The scheme applies to exporters and entrepreneurs under the Baba Saheb Ambedkar Hastshilp Vikas Yojana having a turnover of rs 20 lakh in the previous year.

According to official sources, the purpose of the scheme is to raise exports of handicraft in particular and standardize large-sale quality production of handicraft. It also aims at attracting investment in the sector through public-private partnership (PPP) on a build-own-operate (BOO) basis.

The handicraft setor is emerging as a key area for exports. In the first five months of this fiscal (April - August), the exports of handicrafts have increased from USD 844 million to USD 971 million, rising by 15 % over the corresponding period in the previous fiscal. This rising trend indicates the rich market potential for the country’s handicraft products abroad, according to the industry sources.

The ministry is, at present, executing an ambitious project of setting up India Exposition Mart through the Export Promotion Council for Handicrafts (EPCH). This will provide state-of-the-art facility for the exporters in the cottage sector. The council is also providing infrastructural support for upgrading technological input for the handicraft sector.

The Chairman of the Coffee Board, Mr. G V Krishna Rau, urged India’s 178,308 coffee holdings to reorient production so as to target specific segments of the world market, as the global market goes selective.

At the commodity outlook session at the 112th annual conference of the United Planters’ Association of Southern India, Mr Rau asked coffee growers to be in tune with world market trends by producing quality commercial coffees or differentiated products from estate-brand and specialty coffees to organic, fair-trade and eco-friendly coffees. He said that the mission is to position India as a reliable and distinctive origin of quality coffees which meet a wide variety of consumer preferences at competitive prices and in the required volumes.

Recent buyer-driven initiatives in the world maket like the 4C Common code for Coffee Commodity would, put more pressure on Arabica planters, especially small growers, as they required products to take on social, environmental and sustainable responsibilities. With the 4C initiative envisaging national level audits, growers who met the norms could get a premium while the others got left out altogether, Mr. Rau cautioned.

This fiscal’s export realizations are expected to substantially surpass in value terms the ’04-05 level of Rs 1,110 crore even if the volume dropped marginally eblwo the previous figure of 195,016 tons. This was because the unit value for this fiscal’s exports was averaging rs 72,514 per tons, up by 28 % from Rs 56,895 for ’04-05. Coffee Board estimates indicated that there was sufficient coffee available for export for the last two quarters of this fiscal, even assuming a 6 % margin of error for the official ’04-05 crop estimate of 275,000 tonnes. The world prices are expected to ease from Aug 2006.While exports were showing a downward trend in volume from the ’00-01 level of 2.4 lakh tons to below 2 lakh tons for ’04-05, domestic consumption had grown from 60,000 to over 75,000 tons.

Source: Economic Times

FCNRD(w.e.f. 04.10.2005)						NRE(w.e.f. 04.10.2005)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	4.24	4.29	2.19	3.17	5.46	5.00
2 Years & above but less than 3 years	4.33	4.30	2.28	3.28	5.49	5.10
3 Years & above but less than 4 years	4.36	4.31	2.41	3.37	5.53	5.10
4 Years & above but less than 5 years	4.38	4.32	2.51	3.46	5.57	5.10
5 years only	4.42	4.34	2.61	3.56	5.58	5.10
SB NRE (w.e.f.01.10.2005) 4.25

 

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