India Forex - Forex Trading in India

Indian Forex Markets - Forex Analysis.
Since the onset of liberalization, foreign exchange markets have witnessed explosive growth in trading volume. The importance of the exchange rate to the Indian economy has also been greater than ever before. While the government has explicitly adopted a flexible exchange rate regime, in practice the rupee is one of most efficient trackers of the US dollar. Apprehensions of capital flow-driven currency crisis has held India back from capital account convertibility though the debate continues. The rupee’s deviations from Covered Interest Parity (with respect to the dollar) exhibit relatively long-lived swings. An inevitable side-effect of the Indian exchange rate policy has been the ballooning of foreign exchange reserves to well over a hundred billion dollars. In an unprecedented move, the government is considering using part of these reserves to finance infrastructure investments in the country.

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Foreign Exchange Market in India.
The Indian foreign exchange (forex) market consists of the buyers, sellers,market intermediaries and the monetary authority of India. The main center of foreign exchange transactions in India is Mumbai, the commercial capital of the country. There are several other centers for foreign exchange transactions in the country including Kolkata, New Delhi, Chennai, Bangalore, Pondicherry and Cochin. In past, due to lack of communication facilities all these markets were not linked. But with the development of technologies, all the foreign exchange markets of India are working collectively.

The foreign exchange market India is regulated by the reserve bank of India through the Exchange Control Department. At the same time, Foreign Exchange Dealers Association (voluntary association) also provides some help in regulating the market. The Authorized Dealers (Authorized by the RBI) and the accredited brokers are eligible to participate in the foreign Exchange market in India. When the foreign exchange trade is going on between Authorized Dealers and RBI or between the Authorized Dealers and the Overseas banks, the brokers have no role to play.

Apart from the Authorized Dealers and brokers, there are some others who are provided with the restricted rights to accept the foreign currency or travelers cheque. Among these, there are authorized money changers, travel agents, certain hotels and government shops.
The whole foreign exchange market in India is regulated by the Foreign Exchange Management Act, 1999 or FEMA. Before this act was introduced, the market was regulated by the FERA or Foreign Exchange Regulation Act ,1947. After independence, FERA was introduced as a temporary measure to regulate the inflow of the foreign capital. But with the economic and industrial development, the need for conservation of foreign currency was felt and on the recommendation of the Public Accounts Committee, the Indian government passed the Foreign Exchange Regulation Act,1973 and gradually, this act became famous as FEMA.

Forex Market India - India records fastest rise in Forex Market Turnover.

India’s forex market may be minuscule when compared to developed economies like the US and UK, but government efforts to ease capital movement has led to the country recording the fastest rise in its turnover growth in the segment over the last three years.
India’s share in worldwide foreign exchange market turnover has grown to 0.9 per cent this year, marking a three-fold jump from just 0.3 per cent in 2004.

This is the fastest increase in market share for any other country in the world, according to data compiled by Switzerland-based Bank for International Settlement (BIS).

In comparison, world’s largest forex market the United Kingdom has recorded a much lower change, in percentage terms, in growth to 34.1 per cent of share in 2007 from 31.3 per cent three years ago.

The US, second largest market, saw a slowdown in its share growth to 16.6 per cent this year from 19.2 per cent in 2004. Japan, third largest market, also saw its market share easing to 6 per cent from 8.3 per cent three years ago.

“The growth of India among the emerging nations was notable and as the report says, it possibly reflected the efforts of Indian authorities in recent times to ease control on capital movements,” BIS said in its latest Central Bank Survey of Foreign Exchange and Derivatives Market Activity report.

Besides the highest three-fold jump in market share, India also recorded second highest growth in the daily average forex market turnover after China. According to BIS data, India’s daily average forex market turnover rose to $34 billion in 2007.

The growth rates were much lower in developed markets. The US saw its turnover rising to $664 billion this year, from $461 billion in 2004, while it rose from $753 billion to $1,359 billion in the UK during the same period.

Indian rupee’s market share in the worldwide average daily turnover has also increased to 0.7 per cent in 2007, as against just 0.3 per cent in 2004. Rupee’s market share in1998 and 2001 stood at 0.1 per cent and 0.2 per cent respectively.

Overall, emerging market currencies were involved in almost 20 per cent of all transactions in April 2007. According to the report, there is an unprecedented rise in activity in traditional foreign exchange in the last three years.

“Average daily turnover (worldwide) rose to $3.2 trillion in April 2007, an increase of 71 per cent at current exchange rates and 65 per cent at constant exchange rates. This increase was much stronger than the one observed between 2001 and 2004,” it noted.

Further, in the backdrop of low financial market volatility and risk aversion, there has been a significant expansion in activities of investor groups including hedge funds, which was partly triggered by growth in the use of prime brokerage and retail investors, BIS said.

Moreover, increased levels of technical trading such as algorithmic trading and institutional investors holding more internationally diversified portfolios are also cited as possible reasons for boosting the foreign exchange market activities. The BIS study has considered the daily average figures for the month of April.

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India Forex - Forex Reserves India.
India has fifth largest forex reserves in world.
MUMBAI: India on Friday joined the elite group of world’s five biggest holders of foreign exchange reserves as it added about $4.5 billion last
week to take the kitty to $261 billion. The country surpassed South Korea, which had $257 billion in forex reserves as of September-end, to stand at the fifth spot. While India reports its reserve position every week, South Korea does so on a monthly basis.

China leads the pack with $1,434 billion, followed by Japan ($946 billion), Russia ($440 billion) and Taiwan ($263 billion). According to RBI’s weekly bulletin released on Friday, India’s foreign exchange reserves increased by about $4.5 billion during the week ended October 19.

The rate at which the country’s foreign exchange kitty is growing, especially after the US housing mortgage crisis, the country will soon overtake Taiwan. Among the BRIC (Brazil, Russia, India and China) countries, Brazil has the lowest foreign exchange reserves of $164 billion, according to the latest IMF data.

The other major holders of foreign exchange reserves in the world include Singapore ($152 billion), Hong Kong ($141 billion) and Germany ($126 billion). Total foreign currency reserves of the members of the Eurosystem, including countries which have adopted Euro as their currency, have been estimated at $453 billion.

India’s foreign exchange reserves have continued to grow despite the efforts of the government and Reserve Bank to moderate inflows and encourage outflows through various policy initiatives.

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Indian Forex News - India’s Forex Reserves Near $300 Billion.
India’s Forex Reserves Near $300 Billion.
India is quickly becoming a major force on the foreign exchange reserve scene. While India doesn’t fix its currency to the USD like China does, it still removes most foreign currency from circulation in order to mitigate against inflation. As a result, its reserves have ballooned to nearly $300 Billion, having increased by $100 Billion this year alone. India will now be faced with the same decisions that many other forex reserve hogs have been forced to reckon with, namely how to allocate its reserves. While India hasn’t weighed in prominently on the issue as China has, analysts will be watching closely.
The Economic Times reports:
Rate cut by the Fed in the US along with the positive perception prevailing about the emerging economies such as India has led to sharp rise in inflows, it said.

India Forex - Forex in India
Indian rupee declined against the U.S. dollar today showing the second bearish day as the country’s parliament elections aren’t easily predictable about the actual winner that will form the new government.

While India’s currency was the definite beneficiary of the recent uprise of the high-yielding assets it suffers greatly now from the double impact of the heightened global risk-aversion and the ongoing national elections. The rupee traded at as low as 50 per dollar level today for the first time in 2 months as the traders thought that the winning party will have to create a broad coalition with smaller parties in order to form a government.

Analysts believe that the elections add a layer of uncertainty to an already risky and hard-to-predict Indian market. The fundamental statistics from India suggest bad time for domestic companies and thus it has nothing bullish for the currency. We may see the continuation of the rupee’s weakening during the next few weeks.

If you have any comment on Indian Forex recent action or have any questions regarding this currency, please, feel free to reply below.

Thomas Cook India Forex - Thomas Cook re-brands LKP Forex branches.
Thomas Cook (India) Ltd. (TCIL), a travel solutions company, has announced the re-branding of LKP Forex branches. All LKP Forex branches will bear Thomas Cook (India) branding with effect from February 1, according to a release. This marks the completion of the final step in the amalgamation of the two companies.

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Thomas Cook plans to launch Forex ATMs

Travel-related services provider Thomas Cook India Ltd is planning to install ATMs that convert foreign currency into Indian rupee and vice-versa, even as these will double up as money vending machines.

“We are working on launching ATM-cum-foreign currency converters that will enable conversion of any global currency into Indian rupee and also the other way round. This will also serve as ATM for users,” Thomas Cook Managing Director and Chief Executive Officer Ashwini Kakkar said.

Currency from any part of the country can be changed through these ATMs, while travellers can also withdraw cash using credit cards, he said.

Thomas Cook intends to roll out the first forex ATM within the next one to one-and-a-half month’s time, once the technology sourcing, which would be from foreign vendors, is compete.

The company estimates to incur an installation charge of Rs 50-60 lakh per ATM, and in the initial phase these would be put up at its branches, totaling 60 in the country, he said. Kakkar said the company has received the necessary approvals from Reserve Bank of India (RBI) and the withdrawal limit of the foreign currency will be in line with central bank’s guidelines.

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MUMBAI: Money continues to pour into bank deposits, even as credit demand and bank investments in bonds show signs of slowing. The easing of demand is reflected in the huge surplus that banks are parking with the central bank under its daily reverse repo.

Bankers say an anticipation of further rate cuts has prompted customers to invest in term deposits. The country’s largest bank, State Bank of India (SBI), has reduced deposit rates across maturities from the first week of May.

Also, many other smaller banks have reduced their deposit rates. According to RBI figures, banks have gone slow in lending. Loans have dipped Rs 25,266 crore during the fortnight to Rs 27,46,175 crore as on April 24. Non-food credit dipped by Rs 27,493 crore during the fortnight.

The flight to safety in the currency market has resulted in the dollar strengthening thereby reducing the value of India’s foreign exchange reserves in dollar terms. Forex reserves, which include gold and special drawing rights with the International Monetary Fund, fell by $1.4 billion to touch $251.7 billion during the week ended May 1, 2009.

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Forex Reserve of India.
India’s Forex reserves ready to drop as India prepares to pay for hiked oil prices in US Dollar

India’s increased Foreign Direct Investments is helping a steady rise in India’s Foreign Exchange Reserves despite huge trade deficit and an adverse real Balance of Payment. But things are about to change abruptly as India has to pay for sky rocketing crude oil and natural gas prices. This is time of the year when oil bills stack up, say experts. India’s oil companies are bleeding for a long time and politicians are overlooking the deep red in India’s growing adverse Balance of payments.

After witnessing a rise in inflows for the past three weeks, India’s foreign exchange reserves fell by $648 million to stand at $1,41,898 for the week ended April 22, 2005. The foreign exchange reserves stood at $1,41,898 million during the week under review, according to the Reserve Bank of India’s weekly statistical supplement released here today. The fall in the inflows is mainly due to appreciation of the US dollar and appreciation/depreciation of non-US currencies like Euro, Sterling and Yen, analysts said. The foreign currency assets also registered a fall by $645 million to reach $1,35,950 million for the reporting week. Gold reserves and SDRs remained static at $4,500 million and $5 million respectively. The country’s reserve tranche position in the IMF was down by $3 million to $1,433 million, it said. Loans and advances to the state government rose by Rs 84 crore to Rs 4,693 crore while that to the central government showed a nil balance.

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