INDIAN BANK, HO:International Division

(Fortnightly)

Currency Outlook

US Dollar traded between 45.62 and 46.50 during the past fortnight. The robust recovery in the US economy, spiraling oil prices of above USD 43 a barrel, higher inflation, slowing down of foreign flows, corporate demand for the US Dollar have all resulted in a weaker rupee for most part of the fortnight. The Central Bank was the only speedbreaker arresting the rupee fall temporarily. Expect the rupee to consolidate between 46.30 to 46.70 in the upcoming fortnight.
Forward premia was steady in tandem with the weakening rupee with the six months premia closing at 2.63%. Expect the premia to move in the range of 2.50 to 2.90% in the ensuing fortnight.

Euro traded consistently lower on encouraging US data. Break below 1.2030 might further strengthen the negative outlook for EURO. Expect the gains to be capped at 1.2370 for a move lower to 1.1750/60.
Against Indian Rupee, euro is expected to trade between 54.50 and 56.00.

Robust US data over the past fortnight, saw sterling offered on every rise and expect the trend to continue. Corrective rally to 1.8220 and then 1.8310 to be capped for further downside to 1.8065 with a medium term target of 1.7470/80.
Against Indian Rupee, sterling is expected to move between 82.00 and 85.00.

As long as 108.60 support holds the downside, we expect dollar to test 116 area.
Against Indian Rupee, Japanese Yen is expected to stay between 40.25 and 43.00.

Other News Items

India's exports continued to move on a high growth track in June 2004 at $4.225 billion registering a growth of 34.32% compared to a 6.6% growth in June 2003 aided by a recovery in the world economy. Exports during the 1st quarter was $16.498 billion as against $12.892 billion in the corresponding quarter of 2003-04. (Source - Fin. Exp. Dt.22/7/04)

The BPO/IT Enabled Services will outpace the growth of IT services sector in the next four to five years says Mr. Manish Soman, MD, Deloitte Consulting, India while delivering an address at the one day national seminar on 'BPO - Growing up in value chain'. It was opined that out of the projected USD 230 billion BPO market by 2008, India expects to garner 80% of it. He further said that apart from US, UK and France, Netherlands, Japan and the European countries expect to outsource the BPO services in a big way in the years to come. (Source - Financial Express dt. 24/7/04).

In order to curb higher garment quota premium for exports, the textile ministry plans to open additional quota in the next few days. The Government's move is likely to facilitate genuine exporters. In addition, it will also bring down quota prices in the domestic market. On 15/7/04 the Govt. had opened 10% quota on an annual basis as against the normal 5% under the ready goods system, ie, First Come First Served system hoping to bring the premiums down. (Source - Fin. Express dt 22/7/04).

Export of spices during the first quarter of the current fiscal has more than doubled in terms of volume, while in value it has increased by Rs.172.55 Crore. Total exports during April-June 2004 stood at Rs.585.13 crore as against Rs.412.58 crore during the same period a year ago. This has been mainly because of the increase in demand from the U.S. (Source - Business Line dt. 22.07.04).

Agro-chemicals firms are looking at Overseas markets if domestic sales get impacted on account of monsoon failure. There is a robust demand from Europe,South America and several other countries. Pesticides Manufacturers and Formulators Association of India has estimated export turnover to go upto Rs.3200 crore during the fiscal from Rs.2800 Crore in the previous year (source - Business Line dt.23/7/04)

Issue 1/2004 Dt.01 06 2004
Issue 2/2004 Dt.16 06 2004
Issue 3/2004 Dt.01 07 2004
Issue 4/2004 Dt.16 07 2004