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 44.90 and gained against USD to touch a low of 44.35 but support from Nationalised Banks saw rupee weakening and closing the fortnight at 45.35. Rupee gained due to a bullish stock market. Exporter covering and relatively low oil prices also helped rupee gain.

Forwards were sidelined with six months between 1.80 % - 2.00 % as the main action was witnessed in spot last fortnight.

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 1.2765 dipped to 1.2685, but moved higher to test 1.2901 before closing the fortnight at 1.2830.

Intereat rate expectations are driving the currency markets. Indicators seem to be pointing to a ease of growth in US with a slow down of housing market, fall in retail sales and lower sentiment / manufacturing indices. USD remained unaffected to the gains of Democrats in US elections.

ECB kept rates steady, but Trichet says vigilant on inflation. Market seems to price a 25 bps hike in Dec 2006. Further hikes remain uncertain as Eurozone GDP growth seems to be below expectations which would make ECB decisions tougher as politicians and business lobbies call for ECB to be prudent in its monetary policy.

In the forthcoming fortnight, we expect Euro to trade a range of 1.2710 and 1.2920

EUR / INR is expected to be in the range of 56.85 and 58.30.

GBP opened the fortnight at 1.9080, traded between 1.8950 and 1.9180 before breaking on the downside and closing at 1.8895.

BOE hiked rates from 4.75 % to 5 % to cool off the housing market. The inflation still runs higher than the BOE target of 2 %. UK economy grew 0.7 % in third quarter compared to previous quarter higher than the long term average of 0.6 %.

In the coming fortnight, GBP is expected to get supported at around 1.8840 levels for a test higher to 1.9080.

GBP/INR is expected to trade a range of 84.25 and 86.10

USD opened the fortnight near 117 dipped slightly to 116.60 before moving higher to test 118.60. USD/JPY closed the fortnight around 118 levels.

The data coming out of Japan is mixed. While the GDP growth is higher than expected in the third quarter at 2 % year on year, the leading indicators and tertiary index seem to be painting a picture of slight slow down. There seems to be some differences between Central Bank Officials and the politicians about the monetary policy with BOJ Governor Fukui calling for a preemptive move while ruling party policy makers advising caution.

In the coming fortnight USD / JPY is expected to get supported at 117.40 for a move higher to 118.65

JPY/INR is expected to trade a range of 37.80 and 38.40

 

Other News Items

Riding high on robust growth in the manufacturing and power sectors, industrial output in September grew 11.4 % compared with 7.2 % in the corresponding month last fiscal.

Manufacturing, which has the highest weight in the Index of Industrial Production (IIP) basket, continued its double - digit growth, rising 12 %, against 8.9 % in September, 2005. Electricity generation hit double - digit growth for the first time in the current fiscal, growing 11.3 % and significantly improving from a 0.8 % deceleration last September. However, mining continued to perform poorly, growing just 3.9 %, compared with a slowdown of 1.9 % in the corresponding month of the last fiscal.

On a cumulative basis, industrial output grew 10.9 %, with manufacturing, electricity and mining growing 12.1 %, 6.6 % and 3.1 %, respectively in the first-half of the current fiscal, compared with 9.5 %, 4.8 % and 1.1 % in the last fiscal.

Under the use based classification, the basic goods sector grew 11.3 % in September, capital goods 2.2 %, and intermediate goods 14.7 %. The consumer durables and consumer non durables sectors posted growth rates of 12.6 % and 12.5 % respectively, with the overall growth in consumber goods being 12.5 % during the month.

(Courtesy:The Financial Express)

India - China trade had the potential to double numbers from the current level of Usd 17.6 billiion to reach the targeted Usd 30 billion by 2009, if vigorous efforts were made by both sides, industry chamber FICCI said. "India's exports to China are largely restricted to primary and resource-based products and Chinese exports to India are fairly diversified and include resource-based products, manufactured items as well as low and medium technology products," a paper issued by FICCI said.

The paper said a key feature of the trade pattern was that India's imports from China were less concentrated as compared to India's exports in 2004 - 05, as the top three import items accounted for 52.4 % of the total imports, top five import items accounted for 68.4 % of total imports and top 10 import items accounted for 77.5 % of total imports.

Ficci in the paper recommended that India should capitablise on the growing demand for iron ore, plastic & linoleum in China due to the booming housing and construction industry. India has the potential to raise its market share in the leather sector, in diamond jewellery, decoration and furnishing industry, sea food export and the textile sector. With China's entry into the WTO, immense opportunities have also opened up for setting up for joint ventures and business collaborations between India and China. While total Chinese investment inflows into India during the period August 1991 to July 2006 amounted to about USD 3.5 million, total Indian approved investment in China during the period April 1996 to February 2006 was estimated to be USD 161.4 million.

(Courtesy: Financial Express)

India outpaces Asian nations in PE flows

India Inc has emerged as a leading player in international financial markets. Private equity flows to India through new issuances of bonds, loans and equities have seen the fastest growth rate compared to other Asian emerging countries including China, Korea and Hong Kong.

Private external flows to India have seen a growth of 88 % a year, from USD 2.22 billion in 2001 to USD 19.31 billion in 2005. Indonesia has also seen a high level of growth of 83.2 %, from USD 1.28 billio to USD 5.3 billion. Other countries like China have seen an annual growth rate of 32.6 % to USD 35.79 billion in 2005, China has the largest private external flow followed by South Korea at USD 34.46 billion. Incidentally India has led Asia both in 2004 and 2005 for funds raised through loan syndications. It was the third country behind Russia and Turkey among the world's emerging markets with inflows USD 8.4 billion in 2005. According to the report of Bank of America in this regard, the factors which have driven offshore financing are dramatic growth in investment activity, liberalization in Government policy, lower interest rtaes, hedging benefits, convenience, greater flexibility and strog overseas interest in lending to Indian companies.

The documentation and regulatory approval process for overseas financing are mostly quicker and easier than raising funds domestically. About 80 % of the money raised by corporates through the ECB route are going to fund new projects, source capital goods and expand and modernize existing capacity.

(Courtesy: Business Standard )

FCNRD(w.e.f. 01.12.2006)						NRE(w.e.f. 01.12.2006)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	5.24	5.43	3.86	4.18	6.54	6.24
2 Years & above but less than 3 years	5.00	5.36	3.91	4.07	6.39	6.00
3 Years & above but less than 4 years	4.91	5.32	3.89	4.06	6.34	5.91
4 Years & above but less than 5 years	4.89	5.28	3.88	4.07	6.35	5.91
5 years only	4.90	5.22	3.88	4.09	6.31	5.91
SB NRE - 3.50 % at par with domestic savings deposit

 

Archives

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