(Fortnightly)

Currency Outlook

US Dollar continued to be under pressure with oil companies and major importers covering their exposures. The arbitrage available for corporates between the domestic market and the overseas Non-Deliverable Forwards market added to the pressure. Dollar traded a high of 46.30 before reported central bank intervention pushed it lower to 45.70. Expect the dollar to trade between 45.70 and 46.30 initially, with break on either side giving direction.

Forward premia moved higher during the last fortnight with six month levels closing at 1.69%. Expect it to trade between 1% and 2% over the next fortnight.

Euro traded between 1.1950 and 1.2230 over the past fortnight. As long as 1.2375 caps the upside, we expect euro to move lower to test 1.1790 initially, and 1.1500 later on.

Against Indian Rupee, euro is expected to trade between 54.40 and 58.00.

As long as sterling stays below 1.8490, we might see further moves down targeting 1.7800. Long term, sterling is expected to target 1.9150 after this downmove.

Against Indian Rupee, sterling is expected to move between 83.00 and 86.00.

Supports come in at 106.50 and 103.50 and resistance at 109.50 and 111.25. Expect yen to trade within this broad range.

Against Indian Rupee, Japanese Yen is expected to stay between 41.60 and 44.00.

Other News Items

Federal Open Market Committee (FOMC) of the United States at its meet held on 30 June 2004 raised the Federal funds rate by 25 basis points to 1.25 %. Further increases have also been predicted by market analysts in the near future.- Reuters/30.06.04

Mr Alan Greenspan has been confirmed as U.S. Federal Reserve Chairman for a fifth term, extending his 16-year stewardship of the US economy. Mr Greenspan, 78, has been praised for controlling inflation and guiding markets through various crises like the stock market crash in 1987, Asian financial crisis in 1997, Russian Bonds default and failure of hedge fund Long Term Capital Management in 1998.- Bloomberg/18.06.04

The US textile manufacturers are lobbying hard with the Bush administration for extension of quota regime by another four years upto 2008, as they say that the quota phaseout would lead to job losses in US and Latin America. China, India and Pakistan are expected to benefit from the quota phaseout. Indian government is preparing to take steps to oppose any such move to extend the quota regime- Business Line/17.06.04

India's exports during April-May'04 was USD 10.8 billion compared to USD 8.67 billion in the corresponding period last year. Imports during April-May '04 was USD 14.6 billion compared to USD 11.6 billion in the corresponding period last year.-Hindustan Times/22.06.04

Indian Chemical Manufacturers Association is planning to focus on "Mercosur group of countries" which includes Brazil, Argentina, Paraguay, Uruguay, Chile and Bolivia, to find out the potential for chemical exports and lower cost imports too. India is slated to sign a Free Trade Agreement with Mercosur countries.

Issue 1/2004 Dt.01 06 2004

Issue 2/2004 Dt.16 06 2004