India Forex - Forex Trading in India

India Saturday 27 February 2010: The dollar was under pressure against the euro and slightly rebounded against the yen in Asian trade on Friday after higher US jobless benefit claims clouded the outlook for the world’s largest economy.

The greenback traded slightly higher at 89.24 yen in Tokyo morning trade from 89.09 yen in New York late Thursday. The euro edged up to $1.3566 from $1.3546 and to 121.08 yen from 120.71 yen.

The dollar remained under pressure after the US Labor Department said new claims for jobless benefits had jumped to a three-month high, raising doubts about the strength of the economic recovery.

The seasonally adjusted initial claims in the week ending February 20 rose to 496,000, an increase of 22,000 from the previous week’s revised figure of 474,000, the department said.

Dealers also said remarks by Federal Reserve chairman Ben Bernanke are weighing on the dollar after he told a House committee that the US economy still needs low interest rate for some time, disappointing some who had expected a more hawkish stand.

“The market has kind of reverted to the more uncertain outlook it had last October-December on the US economy and the timing of the Fed’s exit strategy,” Yasuo Nakayama, manager at Shinkin Central Bank, told Dow Jones Newswires.

“After Bernanke’s comments this week that tightening is still distant, unless we get more positive data, the downward pressure on dollar-yen should remain dominant,” Nakayama added.

The single European currency firmed against major currencies, but dealers said it remained top heavy amid the debt and public deficit crisis afflicting Greece as well as other sovereign credit concerns in the bloc.

India Monday 14 December 2009 - The Central Bureau of Investigation (CBI) is investigating foreign exchange contracts to find out whether some exporters had engineered deals through complex derivative instruments resulting in a drain of at least Rs 755.45 crore.

The key suspicions are about misuse of photocopies or multiple use of same papers.

A derivative is a hedging instrument whose value is derived from some other underlying asset such as currency.

An exporter who is expecting payments in US dollars at a future date can hedge his position against fluctuations by entering into an agreement with his bank to sell the dollars at a price fixed earlier. This saves the exporters the risk of getting a lower amount if the value of the dollar goes down during the intervening period.

Investigations and scrutiny by the Reserve Bank of India (RBI) show that many exporters may have allegedly entered into derivative contracts by making false declarations about the value of their assets during 2007 and 2008 in gross violation of the country’s foreign exchange regulation laws.

A preliminary CBI report accessed by Hindustan Times showed in several cases banks have allegedly overlooked many basic procedures.

The RBI had, in a report to the CBI in October, noted the unrealised foreign exchange dues in 11 banks, the report said.
Some of these banks had booked contracts without carrying out due diligence.

“Even where transactions were based on underlying exposure, the banks relied on the photocopies of documents for ascertaining exposure. This also led to a misuse by customers who entered into deals with a number of banks,” the RBI said.

The CBI said it was awaiting responses from the banks.

“Most of these banks have sought time to furnish the requisite data and information,” it said in a report last month.

The Enforcement Directorate, which tracks foreign exchange irregularities told the CBI in a letter that it had also initiated a probe into these deals.

India Friday 11 December 2009 : The rupee edged higher in opening deals on Friday tracking stronger regional peers with gains in other Asian stock markets boosting hopes for capital inflows.

* At 9:03 a.m. the partially convertible rupee was at 46.59/60 per dollar, stronger than its close of 46.64/65 on Thursday. On Wednesday, it fell as low as 46.87 during trade, its weakest since Nov. 27.

* Almost all Asian units were stronger compared to the dollar. The index of the dollar against six majors was marginally higher.

* At 0333 GMT, the MSCI-index of Asian stocks ex-Japan was up 0.8 percent while the Nifty India stock futures traded in Singapore were 0.6 percent higher, suggesting a firm start to the local share market.

* The central bank’s decision to withdraw from Jan. 1 some concessions on overseas borrowing for Indian firms introduced during the global credit crisis had weighed on the rupee on Thursday.

India Thursday 10 December 2009: The rupee weakened on Thursday after the Reserve Bank of India (RBI) tightened some external commercial borrowing (ECB) norms for companies.
A lower start to local shares also added to the downward pressure.

At 10:25 a.m. (0455 GMT), the partially convertible rupee was at 46.68/69 per dollar, 0.3 per cent weaker than its close of 46.535/545 on Wednesday when it dropped to 46.87 during trade, its weakest since Nov. 27.

“This is just a knee-jerk reaction to the tighter rules, but shares performance is likely to determine further direction,” a dealer with a foreign bank said.

The Reserve Bank of India (RBI) said it would withdraw from Jan. 1 some concessions on overseas borrowing for Indian firms introduced during the global credit crisis, although it also eased rules for the infrastructure and telecoms sectors.

“The move is in line with our expectations in terms of nature and timing,” economists at DBS Bank Group Research said in a note on Thursday.

“We think the fact that the RBI has begun tinkering with ECB norms may also be taken as a sign that rate hikes are also imminent,” they wrote.

DBS expects the central bank to raise the reverse repo rate and banks’ cash reserve ratio by 25 basis points each at the Jan. 29 policy meeting and expects a total of 200 basis points of rate hikes by December 2010.

“The rupee is likely to trade in a 46.55-46.80 range for the day. We would see some dollar buying at the lower levels but some initial public offering flows are helping the rupee for now,” said Madhusudan Somani, head of forex trading at Yes Bank.
“Prospects of monetary tightening in the near future is also helping the rupee,” he said, adding expectations are high on industrial output data due around midday (0630 GMT) on Friday.

Factory output had risen a provisional 9.1 per cent in September.

Indian shares were down 0.3 per cent as weak Asian peers pushed investors to take profits on a 3 per cent rally over the past two weeks.

The index of the dollar against six major units was up 0.1 per cent.

One-month offshore non-deliverable forward contracts were quoting at 46.63/73.

India Monday 30 November 2009: With interest rates ruling near zero in most of the developed world, investors’ search for higher returns has seen hoards of them rushing to emerging markets, triggering a sharp appreciation in currencies and stock prices.

Although the rupee had slipped marginally to Rs 46.56/$ on Friday as foreign institutional investors (FIIs) took money out of Indian markets due to jitters following the Dubai crisis, it is expected to strengthen in medium term. “The markets are likely to get over the nervousness by the end of the week and appreciation of rupee is expected to continue due to strong macro fundemantals like growth and low balance of payments,” said Ananth Narayan, head of Standard Charterd’s money market operation in South Asia.

FII inflows into the country in the calendar year till November have crossed $16 billion, compared with the annual inflow of $20 billion seen in 2007. The year 2008 saw foreign institutions turning net sellers to the tune of $9.36 billion.

Further strengthening of the Asian currencies would also depend on their dependence on exports, as Asian central banks of export-reliant economies have repeatedly intervened to check appreciation to maintain export competitiveness.

Forex market-makers points out that India’s strong fundamentals and narrowing trade deficit is lending solid footing to country’s currency. Movement in euro-dollar currency pair — euro has been appreciating against dollar — is also lending traction to the rupee.

India Monday 23 November 2009 -The Reserve Bank of India (RBI) has announced draft guidelines on over the counter (OTC) foreign exchange derivatives and hedging commodity price risk and freight risk overseas.

Under the draft guidelines, RBI has proposed that importers and exporters having foreign currency exposures in trade transactions will be permitted to write covered call and put options both in foreign currency-rupee and cross currency and also receive premia.

Authorised dealer Category I banks will be permitted to offer plain vanilla cross currency options to persons resident in India (other than AD Category- I banks), who transform their rupee liability to a foreign currency liability.

Since importers and exporters are being permitted to write covered call and put options both in foreign currency and rupee as well as cross currency and also receive premia, the facility of zero cost structures/cost reduction structures will be withdrawn.

RBI said the draft guidelines have been prepared after an internal group reviewed the existing guidelines on foreign exchange and commodity and freight derivatives overseas in the light of the developments in the domestic and international financial markets and based on the feedback received from banks, market participants, industry associations and others.

Reserve Bank has since proposed (in the Second Quarter Review of Monetary Policy for the Year 2009-10) to place the draft guidelines on the website for wider comments / views from the market participants / users of foreign exchange derivatives.

The RBI today, placed on its website and comments on the draft guidelines may be forwarded to the chief general manager-in-charge, foreign exchange department, foreign markets division of Reserve Bank of India at its Mumbai office or emailed by 15 December 2009, RBI said in its release.

India Friday 20 November 2009: The Indian rupee fell to new one-week lows in opening trade on Friday weighed by expectations of a weak start to the local sharemarket and continued strength of the dollar versus major units.

At 9:05 a.m. the partially convertible rupee was at 46.69/70 per dollar, off a low of 46.75, its weakest since Nov. 13 and marginally below its previous close of 46.6850/6950.

The dollar and yen kept their broad strength on Friday as investors continued to sell higher-yielding currencies and took profits from gains made in the past few months in risky assets.

Traders said they would be watching the domestic sharemarket open for cues on capital flows, which have been a key influence on the currency in recent years. At 0335 GMT, the MSCI index of Asian stocks ex-Japan was down 0.7 percent while the Nifty India stock futures traded in Singapore dropped 0.6 percent, both suggesting a lower open in the local market.

India Thursday 19 November 2009: The rupee weakened on Thursday morning as a weaker sharemarket, gains in the dollar and concerns authorities may start looking at steps to temper surging capital inflows weighed on sentiment.

Dealers said the rupee was moving line with its regional peers.

At 11:10 a.m. (0540 GMT), the partially convertible rupee was at 46.45/47 per dollar, 0.6 percent weaker than its previous close of 46.20.21.

“The rupee has dropped, tracking the uptick in non-deliverable forward markets plus some weakness in the global stocks,” a senior dealer with a private bank said.

Local shares fell more than 0.6 percent on Thursday tracking losses in other Asian stocks.

Foreigners have bought more than $15 billion worth of shares so far in 2009, after selling more than $13 billion last year. These inflows have helped the rupee recover from a record low of 52.2 in March.

One-month offshore non-deliverable forward contracts were quoting at 46.46/56, weaker than the onshore spot rate. Offshore NDFs rates have been either flat or stronger than the spot market in recent sessions.

Dealers said there were concerns over imposition of capital controls in Asia after Brazil took another step on Wednesday aimed at containing the appreciation of its currency, unveiling a 1.5 percent tax on certain trades involving American Depositary Receipts issued by Brazilian companies.

Finance Secretary Ashok Chawla said the government was not planning to cap overseas borrowing by corporates.

India Wednesday 4 November 2009 : India’s purchase of $6.7 billion worth of gold from the International Monetary Fund (IMF) is a pointer that New Delhi sees a dim future for the dollar and is making a bullish call on the precious metal, according to a leading US business magazine.

“The move is already profitable as the Indians bought their gold at prices averaging around $1,000 an ounce. Gold closed at a record $1,085 an ounce Tuesday in New York,” Robert Lenzner, National Editor of the Forbes magazine, noted in a commentary on Wednesday.

The big buy from India, bulking up its gold reserves by 55 per cent, follows months of huge gold accumulation by Chinese authorities as well as hedge fund operators like John Paulson and others amid growing anxiety about the viability of the dollar as the world’s reserve currency, he noted.

Comparing history’s most successful investor Warren Buffett’s $34 billion bid for the rest of Burlington Northern Santa Fe, Lenzner said: “India, by comparison, is making a direct bullish call on gold, just as China, its major rival in Southeast Asia, did some months ago.

India Monday 26 October 2009: Rupee dropped on Monday tracking shaky domestic shares, which failed to provide clarity on the direction of foreign fund flows, but higher regional units and a weaker dollar prevented a sharp slide.

At 11:05 a.m. (0535 GMT), the partially convertible rupee was at 46.60/61 per dollar, 0.2 per cent below Friday’s close of 46.50/51. On Thursday, the rupee had dropped to as low as 46.82, its lowest since Oct 7.

“The rupee is just tracking the stock market and other Asian units today. Market is likely to be really quiet, it should hold in a range of 46.45-46.60,” a senior trader with a private bank said.

“The central bank is expected to just give some sound bytes about how soon to tighten at the policy tomorrow, but that’s unlikely to have much impact on the rupee, unless there is a surprise cash reserve ratio hike,” he said.

India’s central bank will keep its benchmark lending and borrowing rates on hold in its quarterly policy review on Oct 27, poll showed.

Only three of the 20 analysts polled expected a hike in the cash reserve ratio. Shares were trading down 0.4 per cent, after a higher start, amid subdued cues from Asia, and as traders awaited more clarity from corporate earnings.

Foreign funds have bought a net $14.1 billion worth of shares so far in 2009, following net sales of more than $13 billion last year. The dollar index, a gauge of the US unit’s performance versus six majors, was 0.2 per cent lower.

All Asian units were stronger compared to the dollar.

The dollar fell to a 14-month low against the euro on Monday as a Chinese report saying Beijing should increase its holdings of euros and yen in its foreign reserves led investors to sell the greenback.

One-month offshore non-deliverable forward contracts were quoting at 46.63/73, marginally below the onshore spot rate. “Higher capital inflows, in conjunction with smaller trade deficits (and thereby current account deficits), and continuing US dollar weakness, are likely to strengthen the rupee,” economists at Axis Bank said in a note.

“The effect of a rate hike on capital flows remains uncertain, whether equity-related outflows will outweigh debt-related inflows,” they added.