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 45.1150 and moved higher to the levels of 46.06, where state run banks are said to have intervened on behalf of the Central Bank of the country and Rupee traveled towards the region of 45.60, helped by capital inflows into local stocks. Further strengthening of Rupee was halted by the comments later from Finance Minister that Rupee had appreciated against EURO, JPY and GBP over the past few months and depreciated only nominally against dollar. His comments were echoed by the Central Bank Deputy Governor Mr. Rakesh Mohan. Analysts said the comments indicated that the authorities were not concerned about the Rupee's fall and the move reflected widening trade and current account deficits and the rebounding dollar.

In the ensuing fortnight, it is expected that dollar will continue to firm up against Rupee with 45.55 as its base and travel to the region of 46.30 .

In the back drop of rising dollar against Rupee, the South move of forwards was stalled for a while. In fact, the near months forwards spiked up a bit, but it was not so prominent in the Long term forwards (beyond 3 months to one year). 6 months forwards opened at 0.36 pct and moved to a high of 0.53 pct , before closing at 0.46 pct. With the mixed trend, Rupee staying soft and exporters off-loading for every up tick in Rupee, Forwards are likely to stay range-bound. Six months forwards likely to trade in the range of 0.35pct and 0.60 pct.

Euro opened the last fortnight at 1.1992 and traded to a high of 1.2085. With the continuous demand for dollars in the global market, EURO turned further soft to trade to the levels of 1.1641, before closing at 1.1724. ECB during its meeting held on 3rd instant left the rates unchanged at 2.00 pct. As expected by the market, FOMC hiked the rates for the 12th consecutive instance from 3.75 pct to 4.00 pct. Rates tilted the balance totally in favour of dollar because of which even the release of record high trade deficit data of US (USD 66.1 Bio as against the expectations of USD 61.5 Bio) could not make any adverse impact on the rally of Dollar.

ECB meeting is scheduled for 17th instant. EURO remains pressured not only by the dollar strength but also by the on-going riots in Paris. In view of the above and also based on the chart patterns, it is expected that EURO is likely to trade in the range of 1.1800 - 1.1380 in the ensuing fortnight.

Against INR, EUR is expected to trade in the range of 54.00-52.00

 

Cable opened the fortnight at 1.7702 and traded in a range of 1.7796-1.7305. Dollar continued to establish its strength against British Pounds also. Added to this, the trade deficit data of UK at GBP 54.4 Bio as against the previous data of GBP 53 Bio also resulted in further weakening of GBP. Bank of England , during its meeting of the Monetary Policy Committee held on 10th November, decided to leave rates unchanged at 4.5 pct.

The current dollar strength is expected to continue for the ensuing period also and Cable is likely to test lower levels like 1.7250/1.7080/1.6930. The topside is limited to 1.7600

Against INR, we expect GBP to trade in the range of Rs.80.50-78.15

During the last fortnight, USD opened at 116.40 against JPY and traded in the range of 116.38-119.43, before closing at 118.91. With respect to JPY, Dollar had only one - way move, during the entire fortnight, without any significant dip. Yen showed little reaction to US President George W Bush's call for China to do more to allow the yuan to appreciate, saying the trade imbalance between the two countries was 'bothersome'. But with China keeping the yuan on a tight leash after the July 21 re-valuation, many speculators have given up bets on a quick gain and dumped the yen, contributing to the Japanese currency's slide.

In the ensuing fortnight, we expect USD/JPY to find its base at 116.85 for an upmove to 120.95/122.10.

Against INR, JPY would trade in a range of 39.15-37.45

Other News Items

Export of ornamental fish is gradually picking up and has registered a 20% rise to 36 tonne in April-September 2005, from 30 tonne in the same period last year. Despite segment being under the burden of high freight charge in India, earnings from exports on Indian Ornamental fish have touched 2.68 crores.

Singapore is the world's leading exporter of ornamental fish and currently holds almost 25% share of the global ornamental fish trade. Indonesia, Malaysia and China are the other leading exporters. India exports just a miniscule of a whopping $500 million worldwide ornamental fish business.
Currently, the domestic market remains the major consumer of Indian ornamental fish. However, the aquarium fish industry has become a notable foreign exchange earner.

Source : Business Standard

India exported a total of 1.5 million tones of oilmeals during the first seven months of the 2005-06 financial year (April-March),up 15.3% from the year earlier period according to the Solvent Extractors Association(SEA) of India.

India exported 130,125tonnes of castor meal during the seven month period compared with 28,650tonnes exported a year ago. The main buyers are Taiwan and South Korea. Vietnam, Thailand and Japan have also started importing castor meal from India, that led to larger export volumes. Vietnam also bought 40,000tonnes of rice bran extraction from India during the period under review. Total Soyabean extraction exports, during the period stood at 882,150tonnes, up 9.2% from the year earlier period.

According to SEA, groundnut meal exports fell almost 30% to 75000 tonnes during Apr-Oct. In Apr & May 2005,the export was much lower as compared to last year, mainly due to lower crushing margin and production. However with improvement in crushing margin, the production stepped up leading to a revival of export and also fresh demand from Taiwan, South Korea, and Vietnam following SEA delegation's visit in August 2005.

The export from Kandla is reported at 959,875tonnes (64%), followed by Mumbai which handled 286,750tonnes (19%),Vizag handled 117,500 tonnes (8%), Bedi handled 98,675tonnes (7%), and Kakinada handled 36,658tonnes (2%).

Source : The Financial Express

The Tamilnadu government plans to set up a 'little Japan', an exclusive township for Japanese investor. Tamilnadu government is firmly committed to creating an entire ecosystem wherein investors feel welcome, wanted and wholly satisfied. Investors from Japan are also looking for a township that would address the housing, cultural, educational, entertainment, social and culinary needs of the expatriate community-the concept being that this 'home away from home' will definitely enhance the quality of life and thereby substantially contribute to increasing productivity and effectiveness. The Chief Minister told the delegation from Fukuoka city in Japan, led by its mayor, Hirotaro Yamasaki. Both the sides discussed various opportunities for trade and investment in Tamilnadu.

Thanking the Japanese government for its Rs643crore assistance through Japan Bank for International Co-operation for afforestation project-I in the state, she said the Bank had committed a further assistance of Rs567.42 crore for the Phase II of the project. This co-opertaion will extend substantially in the years to come according to the Chief Minister of Tamilnadu.

Mr Yamasaki said the delegation recognized that Tamilnadu was the most attractive State in India for investments and that Tamilnadu would attract investment not only from Japan but also from other countries. The mayor assured that the delegation which comprised members representing mostly IT & IT-related industries would take advantage of the immense potential of the IT talent in Tamilnadu, promote relations between Fukuoka city and Chennai to achieve the objective of the mission.

Source : The Financial Express

The country's exports of plantations, Agri and allied products, marine products, ores and minerals and textiles, albeit their relatively low share, did reasonably well during the first four months of the current fiscal as against their lackadaisical performance last fiscal. An analysis of the disaggregated trade data compiled by the Directorate General of Commercial Intelligence & Statistics and compiled by the Economic Division of the Department of Commerce shows that textile exports with a weightage of 14.74% in total exports posted a 7.45% growth at $4233.5 million during April to July 2005 as against $3940 million in the corresponding months of 2004

Within the segment, the readymade garments sector performed exceedingly well by logging a growth of 16.12% during the period under review at $2341.49 million ($2016.51 million), reflecting the ability of the domestic garment industry to capture new markets after the abolition of the quota regime from January 01, 2005.

While exports of agriculture and allied products (weightage7.44 %) notched up a 10 percent growth at $2136.79 million during April-July 2005($1942.58 million), plantations (0.77%) segment comprising tea and coffee, registered a growth of 7.32% at $222.35 million ($207.18 million). Interestingly, high growth segment in the export front during the period under review includes transport equipment (70%), petroleum crude and products (54%) and iron ore (54%) and inorganic/organic /agro chemicals at 49%.

Overall the country's exports during the first four months of the current fiscal registered a roboust 23.75% growth at $28715.96 million ($23204.64 Million). On the import front, bulk imports with a share of 41.83 % in total imports did well by clocking a growth of 38 % at $17735.34 million during the period under review, against $12860.66 million in the corresponding months of 2005. The second significant share in total import goes to petroleum, crude and products (30.52%), which posted a high growth of 36.49% at $12939.26 million ($9479.76 million).

Overall, total imports during the period under review registered a 37% growth at $42397.05 million as against $30970.87 million in the corresponding months of 2004.

Source : Business Line

FCNRD(w.e.f. 04.11.2005)						NRE(w.e.f. 04.11.2005)
PERIOD	USD	GBP	EUR	CAD	AUD	NRE
1 Year & above but less than 2 years	4.48	4.42	2.35	3.42	5.46	5.25
2 Years & above but less than 3 years	4.60	4.49	2.55	3.58	5.52	5.40
3 Years & above but less than 4 years	4.65	4.50	2.70	3.68	5.57	5.40
4 Years & above but less than 5 years	4.69	4.51	2.79	3.76	5.63	5.40
5 years only	4.72	4.51	2.89	3.86	5.66	5.40
SB NRE (w.e.f.01.10.2005) 4.25

 

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