INDIAN BANK, HO:International Division

(Fortnightly)

Currency Outlook

US Dollar traded between 46.19 and 45.65 during the past fortnight. The Union Budget unveiled last week, has brought the reform process forward. The increase in Foreign Direct Investment limit in insurance, telecom and aviation sectors has boosted the rupee sentiment. Expect the trend to continue. As long as US Dollar trades below 46.30, expect it to test lower to 45.20/44.95 area.

Forward premia moved in ranges with six month levels closing at 1.86%. Expect it to trade between 1% and 2% over the next fortnight.

Euro traded higher during the past fortnight taking out earlier resistance at 1.2375. As long as 1.2250 supports the downside, expect euro to target 1.2650.

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

Soft US data over the past fortnight, saw sterling being well bid. It touched a high of 1.8660 before correcting lower. As long as sterling stays above 1.8260, we might see further moves higher targeting 1.9150.

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

As long as 107 support holds the downside, we expect dollar to test 111 area.

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

Other News Items

The Union Government has set a 16% annual export target for the year 2004-05, which in aggregate amounts to USD 73.40 billions export turnover. The Ministry of Commerce officials are optimistic that with the emerging international scenario, the renewed efforts to promote exports and expanding opportunities for Indian exports, the target is well within reach. Business Line/03.07.04

The Union Budget introduced a new tax structure for textile sector aimed at offering relief to smaller players in a largely unorganized sector. Handloom and powerloom sectors were brought into the Centralised Value Added Tax(CENVAT) last year. Now, the mandatory CENVAT duty will be abolished and all players, whether handloom, powerloom or composite mills will have the option to choose between an exemption route or the CENVAT route. Reuters/08.07.04

The Union Government has affirmed its commitment to reform, with an increase in Foreign Direct Investment(FDI) limits in insurance, telecom and aviation sectors to 49%, 74% and 49% respectively. Reuters/08.07.04

The reduction in import duty on platinum and customs duty on platinum and raw, precious coloured gemstones is expected to reduce manufacturing costs, improve sales volumes and push up export turnover.

Reuters/08.07.04

The Union Government, in the recent budget, has withdrawn the tax exemption allowed on interest earned by Non-residents on Non-Resident(External) accounts and interest earned on deposits in foreign currency by Non-Residents or not-ordinarily residents.

Business Line/09.07.04

Issue 1/2004 Dt.01 06 2004
Issue 2/2004 Dt.16 06 2004
Issue 3/2004 Dt.01 07 2004