India Forex - Forex Trading in India

India Saturday 30 January 2010 - India’s foreign exchange reserves fell by $ 2.223 billion to$ 282.938 billion in the week ended January 22 as compared to the level of $ 285.161 billion in the previous week.
Foreign currency assets came down during the week by $ 2.179 billion to $ 258.080 billion from $ 260.259 billion in the previous week, the Reserve Bank of India (RBI) said in its weekly bulletin.
According to it, the foreign currency assets expressed in US $ terms include the effect of appreciation/depreciation of non-US currencies (such as euro, sterling and yen) held in reserves.

Gold reserves during the week remained at the previous week’s level of $ 18.292 billion, the bulletin said.
Special drawing rights (SDR) declined by $ 34 million to $ 5.147 billion as compared to $ 5.181 billion in the previous week.

The country’s reserve position in the International Monetary Fund (IMF) went down by $ 10 million to $ 1.419 billion during the week, the bulletin added.

India Saturday 30 January 2010: Tata Tea, India’s largest tea plantation and processing company, on Thursday announced a 77% drop in consolidated quarterly net profit
despite higher sales, thanks to notional loss on foreign currency assets.

Net profit nosedived to Rs 92 crore in the December quarter from Rs 396 crore in the year-ago period. Net sales, during the period, went up by 21% to Rs 1,540 crore from Rs 1,278 crore.

Operating profit rose by 17% to Rs 165 crore due to improved performance and lower interest costs, the company said in a stock exchange filling. But the notional loss on translation of short term foreign currency financial assets has pulled down the net profit.

The loss stood at Rs 9 lakh in the December quarter, as against a gain of Rs 582 crore in the corresponding previous quarter. On the standalone basis, net profit declined to Rs 37 crore for the December quarter from Rs 48 crore in the same period last year. Total income rose to Rs 471 crore from Rs 428 crore.

Since the major part of the company’s business is in the overseas markets, the consolidated results are better indicator of Tata Tea’s performance. Tata Tea MD Percy Singaporia said the company would make its major brands such as Tetley, Good Earth, Himalayas and Tata Tea global. “All innovations in the beverage space will take place on these brands.” Shares of Tata Tea lost 1% to close at Rs 918.85 in a flat Mumbai market.

India Friday 29 January 2010 - The dollar reached a 6-1/2-month peak against the euro Thursday as investors remained anxious about the fiscal health of Greece and other small euro zone countries.

A US Senate vote confirming Ben Bernanke for a second term as Federal Reserve chairman had little impact on exchange rates, as analysts said his confirmation was widely expected.

The euro fell to $1.3938, its worst showing since mid-July, as investors worried Greece may not be able to service its debt, putting pressure on the euro and raising fears the country could be forced out of the euro zone. The euro last traded at about $1.39, down on the day.

Germany and France denied a report suggesting an imminent European Union bailout for Greece, while Athens said it had not requested help and was the victim of speculators intent on attacking it as the euro zone’s “weak link.”

Adding to pressure on the euro were warnings by credit ratings agencies that Portugal needs a clear plan for further budget cuts beyond 2010 to prevent debt rating downgrades.

“There are a lot of troubling debt situations in Europe, in Greece and beyond, and that is hurting the euro,” said Melvin Harris, strategist at Easy Forex in New York.

The premium that investors demand to hold Greek government bonds rather than benchmark German Bunds rose to its highest level since the euro was launched more than a decade ago.

The cost of insuring Greece’s sovereign debt against default also hit a record high.

Debt worries could push the euro as low as $1.35 in the coming weeks, Harris said, while sterling, which fell to near $1.61 suffered after Standard & Poor’s said Britain’s banking system was no longer one of the world’s most stable.

The US dollar fell to below 90 yen as losses on Wall Street prompted investors to close riskier trades financed by cheap borrowing in the yen. The euro dropped to about 125 yen after hitting a nine-month low of 125.07 yen.

Some analysts said the Greek debt worries were overdone and that the euro was just staging a technical retreat after running up strongly in 2009, when it topped $1.51.

Investors appear to be “using the Greece thing as an excuse to just do a correction of the currency’s run since March last year,” said Chuck Butler, president of Everbank World Markets in St. Louis.

Others said European debt worries, White House plans to limit risk-taking at US banks, a slide in global stock markets and Friday’s release of US gross domestic product data all sowed uncertainty, prompting investors to unwind trades funded with cheaply borrowed dollars and yen.

“There’s been a lot to keep the market off balance, and we haven’t regained our feet yet this year,” said BNY Mellon strategist Michael Woolfolk.

In the United States, Bernanke won approval for a second term leading the Fed, although 30 out of 100 senators voted against his confirmation. His confirmation looked less certain last week.

“The surprise, and the impact, would have been much larger if he wasn’t approved,” said Win Thin, currency strategist at Brown Brothers Harriman in New York.

India Friday 29 January 2010 : The rupee today declined by four paise to 46.40 against the US Dollar in the early trade, as against its previous close of 46.36, on sustained buying by bankers and others amidst bearish phase in equity markets, traders at the interbank Foreing Exchange (FOREX) said here.

It had ended almost steady at 46.36 yesterday.

The local unit was weak following the demand for greenback from importers, traders informed.

Later, it oscillated in a narrow range between 46.42 and 46.32 per aginst the US currency in the intra day trade.

Firm US currency against other major global currencies which also influenced the trading sentiment, they added.

India Thursday 28 January 2010: The dollar hit a six-month high against the euro on Wednesday after the Federal Reserve said it intends to end some emergency lending and asset-buying programs and sounded slightly more upbeat on the US economy.

The euro fell below $1.40 for the first time since July after the Fed said US economic activity had strengthened.

And while the central bank said it will keep interest rates low for some time yet, a dissenting vote from one official suggested pressure was building for tighter policy, which would boost returns on dollar-denominated assets.

“The statement is overall a positive one. The Fed is saying they have enough confidence in the markets to let the liquidity measures expire as expected,” said Kurt Karl, chief US economist at Swiss Re in New York.

In particular, analysts said the dollar got a boost when the Fed and other major central banks said they would end emergency dollar lending operations on Feb 1.

“That takes away dollars in circulation and that should be dollar-supportive simply because of supply and demand,” said Greg Salvaggio, senior vice president at Tempus Consulting in Washington.

According to Reuters data, the euro fell to $1.3994, its lowest since July 15. It traded above $1.51 in late 2009.

Worries about Greece’s fiscal health also weighed on the currency, which last changed hands at $1.4018, down 0.4 percent on the day.

The dollar also rose 0.4 percent to 90.01 yen, wiping out earlier losses that took it as low as 89.15 yen. It was also up 0.4 percent at 1.0500 Swiss francs, while the British pound was up 0.1 percent at $1.6164.

The Fed’s board voted 9-1 to keep rates near zero for an extended period, with Kansas City Fed President Thomas Hoenig dissenting.

“Going forward, that’s more of a dollar positive scenario since that suggests in coming meetings, we could see that phrase (extended period) removed from their statement,” said Joe Manimbo, a currency trader at Travelex Global Business Payments in Washington.

India Thursday 28 January 2010 - The rupee fell to its lowest in more than three weeks on Wednesday as a stock market slide triggered concerns of fund outflows, and weighed down by the dollar’s rise overseas.

The partially-convertible rupee ended at 46.3650/3750 per dollar, about 0.5% below its previous close of 46.1250/1350. It dropped as low as 46.425 during trade, its weakest since January 4. Falling stocks, which dropped for a sixth day, brought out the rupee bears, a senior trader with a foreign bank, who expected a range of 46.30 to 46.50 on Thursday.

Fund flows in the stock market is a key driver for the rupee. Foreigners have dumped around $900 million of stocks in eight out of the last nine trading sessions. The BSE share index dropped 2.9% to its lowest close in nearly 12 weeks.

In 2009, the rupee had gained 4.7% as foreign funds bought shares worth $17.5 billion and helped the benchmark index jump 81%.

“There is also concern on RBI’s rate decision this week on growth,” the senior trader said, referring to RBI’s policy review on Friday.

A poll showed that most economists expect the central bank to raise banks’ reserve requirement by up to 50 basis points at its review meeting.

A minority in the poll expected it to raise benchmark interest rates. The dollar’s strength versus the euro also weighed. The US currency rose as investors liquidated riskier assets on concerns about China tightening banks’ lending and ahead of the Federal Reserve’s rate decision later on Wednesday.

India Wednesday 27 January 2010 - The rupee today depreciated by 15 paise against the US currency in early trade on continued capital outflows by foreign funds from equities.

At the Interbank Foreign Exchange (Forex) market, the Indian rupee fell by 15 paise to trade at 46.27 a dollar. The rupee ended a shade higher at 46.12/13 in the previous session on Monday.

Dealers said increased capital outflows by foreign funds from equity markets and some dollar demand from importers weighed on the rupee’s sentiment.

The Bombay Stock Exchange index Sensex fell by 188.51 points, of 1.10 per cent, to 16,591.95 points in the morning trade.

India Wednesday 27 January 2010: The rupee dropped to its lowest level in more than three weeks on Wednesday on the back of an early drop in the local sharemarket which played catch-up with the rest of Asia as trading resumed after a day’s break.

At 9:07 a.m. the partially convertible rupee was at 46.31/32 per dollar, after touching 46.34 early, its weakest since Jan. 4 and below its previous close of 46.1250/1350 on Monday.

The index of the dollar against six major currencies was little changed. Most Asian currencies were however stronger compared to the dollar, which may help limit the rupee’s fall.

The Reserve Bank of India releases its quarterly monetary policy review on Friday, with markets expecting an increase in banks’ reserve requirements.

The BSE Sensex was down 1.1 percent in early deals on Wednesday, led by losses in financial stocks as the market caught up with the fall in world stocks on Tuesday when local markets were shut for a national holiday.

Traders were awaiting comments post the Fed’s Open Market Committee (FOMC) meeting, which concludes on Thursday and is expected to yield little in terms of a policy shift.

India Tuesday 26 January 2010: Despite having one of the largest current account deficits in the region, the Reserve Bank of India has been one of the few central banks in
the region to refrain from piling up its reserves by not purchasing dollars through intervention in the currency market.

Analysis of the trend in foreign exchange reserves pile-up across major Asian economies, post-Lehman collapse, indicates that while reserves pile-up in China, Hong Kong, Korea and the Philippines has been growing steadily, there have been some blips with respect to reserves pile-up in Indonesia, Thailand and Malaysia. Vietnam is among the few in the region to witness a perceptible slowdown in reserves growth. India’s reserve pile-up is one of the slowest.

The data on reserves pile-up by central banks is seen as a proxy for central bank intervention in the currency markets by many. RBI has built its foreign exchange reserves of $280 billion by buying dollars that foreign investors have been bringing in. However, reserves have gone up in dollar terms also because of the other currencies strengthening against the dollar.

According to Taimur Baig, Deutsche Bank’s chief economist for India, “Across Asia, central banks are pursuing varying strategies, depending on their concerns about inflation and growth. While Indonesia is intervening only occasionally and allowing the rupiah to appreciate as growth strengthens, the Philippines (which is largely export-dependent) is intervening aggressively to prevent its currency from steep appreciation, which could undermine its fledgling recovery.”

At a time when the central bank is faced with the challenge of surge in inflows and rising prices at the same time, it is considered prudent for the central bank not to absorb inflows and let its currency appreciate. This is because, on one hand a strong currency makes import of price inelastic commodities such as oil cheaper on one hand and reduces the demand side pressure on prices.

By not absorbing inflows, the central banks indirectly end up controlling the growth in money supply, pointed out an economist with a foreign bank requesting anonymity.

The Singapore economy is expected to act more like the Indian central bank. “We continue to believe the risk of a change to a gradual trend appreciation stance in April is rising, as inflation expectations start to pick up. In particular, we are likely to see a clearer shift in the Monetary Authority of Singapore’s focus towards food prices in the coming months,” said Rahul Bajoria of Barclay’s emerging market research, in a report released on Monday.

Another report by Moody’s released on the same day points out that “large capital flows in key Asian economies are putting upward pressure on exchange rates.’’ However, the central banks in many of these economies have also absorbed substantial inflows resulted largely due to rebound of exports and revival of the equity markets in these markets. This is reflected in the foreign exchange reserves pile-up in these economies.

India Tuesday 26 January 2010 - India’s currency, bonds and stock markets are closed on Tuesday for the Republic Day holiday. Trading resumes on Wednesday.
On Monday, the 30-share BSE index dropped for the fifth session in a row, losing 0.5 percent to 16,780.46, its lowest close in just over a month.
The partially convertible rupee ended at 46.1250/1350 per dollar, rising from an intraday low of 46.2525 and a touch stronger than Friday’s 46.15/16. The yield on the benchmark 10-year government bond ended at 7.58 percent, higher than Friday’s close of 7.55 percent.