India Forex - Forex Trading in India

India Monday 31 May 2010: The rupee dropped early on Monday as concerns the eurozone growth prospects grew post the Spain downgrade but domestic shares and the March quarter growth would be watched for further direction.

At 9:05 a.m. the partially convertible rupee was at 46.50/51, weaker than 46.35/36 at close on Friday. The unit rose 1.3 percent last week.

The euro stabilized against the dollar but remained under downward pressure after Fitch Ratings downgraded Spain’s credit rating, refuelling concern about Europe’s debt woes hurting the global economy.

Most Asian currencies were stronger compared to the dollar. However, the index of the dollar against six major currencies was up 0.06 per cent.

Indian shares, however, rose 0.2 per cent as investors put euro-zone worries behind them and looked ahead to a stronger economic data from the government later in the day.

The March quarter growth figures due around 11 a.m. (0530 GMT) and would be eyed for direction.

The economy probably grew 8.7 per cent in the quarter from a year earlier, its strongest since December 2007, the median forecast of 20 economists showed.

India Tuesday 25 May 2010 - The rupee weakened, extending losses from its worst week since 1995, after data showed overseas investors pared holdings of local shares for the fifth straight day, the longest stretch since February.

The currency fell for a fourth day on concern money managers will pull more funds out of developing countries as the debt crisis in Europe fuels volatility in global financial markets. A gauge of swings in India’s stocks rose to an eight-month high on May 21 as a similar measure in the US touched the highest level in more than a year.

“The sentiment continues to remain rupee-bearish, tracking the weakness in the stock market,” J Moses Harding, a Mumbai-based executive vice-president at IndusInd Bank, wrote in a research note on Monday. “For the week, we need to track foreign investor actions in the stock market,” to estimate the rupee’s further movements.

The rupee slipped 0.1% to 46.98 per dollar. It slumped 3.6% last week, the most since October 1995. The rupee has lost 4.4% this quarter, the second-worst performance among Asian currencies after South Korea’s won.

Offshore forwards indicated the currency will trade at 47.41 to the dollar in three months, compared with bets for 47.33 at the end of last week. The NSE Volatility Index (VIX) touched 32.3 on May 21, the most since September.

The Chicago Board Options Exchange Volatility Index, the benchmark for US stock options, rose as high as 48.20 the same day, the highest level since March 2009. The rupee’s one-month implied volatility measured 14.5% on Monday, near a 14-month high of 15% touched on May 21. The gauge of expected currency swings is quoted by traders as part of option prices.

India Friday 21 May 2010: The Indian rupee recovered from six-and-a half-month lows on Friday afternoon as domestic shares trimmed losses and exporters sold dollars to benefit from the unit’s sharp fall.

Gains in the euro also helped sentiment. The euro surged for a third straight day on Friday as market players unwound more short positions in the single currency.

At 12:12 p.m. (0642 GMT), the partially convertible rupee was at 46.80/81 per dollar, marginally stronger than its previous close of 46.81/82.

In early trade, the rupee fell as low as 47.33, its lowest since Nov. 3, 2009, at which point it was down 1.1 percent on day.

India Tuesday 18 May 2010: After the initial controversy, the Indian government’s experiment to deploy $5 billion of the Reserve Bank of India’s foreign exchange reserves to other avenues disappeared from front pages.

The scheme is not only alive, it’s ticking over satisfactorily. India Infrastructure Finance Corporation, UK, (IIFC) — the nodal agency based in the UK to route the forex, has sanctioned $1.57 billion in the first 18 months of existence, with a profit after tax (PAT) of $19.5 million. Ravneet Kaur, joint secretary, ministry of finance and CMD of IIFC India, said: “As an experiment, the scheme is doing very well, and there is a lot of scope. There is no justification we could look at to scale back the scheme. We could even go back to RBI and look at a further increase,” she said. IIFC UK’s profits will be ploughed back to expand its operations further, Ms Kaur said.

Given the time frame for infrastructure project financing, IIFC UK officials estimate that it will be some years before most of the current funds are disbursed. IIFC UK, a wholly-owned subsidiary of the parent company in India, was set up specifically with a mandate to route $5 billion from RBI’s forex, for overseas purchase of capital goods equipment in the infrastructure sector. It started operations around September 2008. IIFC has financed 13 proposals across a range of sectors, mainly power, ports, railways, and metro projects. It has around $1.2 million of proposals in the pipeline at present. The main worry about deploying RBI’s forex reserves in infrastructure financing was that the money could find its way back into the Indian market, creating monetary pressures.

The scheme has been ring-fenced such that IIFC UK directly pays the overseas seller, and the Indian importer gets the equipment, in such a way that the forex reserves never enter the country. In addition, IIFC works with a consortium of bankers for various infrastructure proposals, and limits its exposure in any one project. Despite the global recession, Ms Kaur said,” “except for a short period in 2008, Indian corporates are accessing overseas funds, and the flow of funds to the infrastructure sector is on the increase.”

India Monday 17 May 2010 - Risk appetite found a floor last week, as volatility reduced on the measures announced to support the troubled euro-area economies. In tandem, the rupee failed to convincingly break above 45 and finished the week on a weak note. In the near-term, global uncertainties may continue to cap the downside to dollar-rupee as the market debates the efficacy of the E750 billion emergency fiscal stabilisation fund from the EU and IMF, designed to address euro-area sovereign concerns.

However, a positive surprise could come from a possible yuan revaluation, especially for the Asian currencies. Onshore markets are focused on the ongoing 3G auctions (flows may be spread over weeks though) and the related capital inflows. Technically, the short-term outlook for USD-INR is mixed. Both stochastics and the RSI are in neutral territory, indicating sideways movement. Immediate resistance is at 45.66, which is the 100-day moving average. On the downside, 44.80 is an important trend support. In sum, USD-INR is likely to trade in 44.80-45.50 range this week.

India Friday 14 May 2010 - The rupee strengthened for a second day as gains in local stocks spurred optimism overseas investors will buy the nation’s assets to benefit from its relatively fast economic growth.

The currency appreciated 0.1% to 45.0775 per dollar at the close of trade on Thursday.

The rupee extended its gains this week to 0.9% after a government report showed on Wednesday that factory output rose more than 10% for a sixth month in March.

“The rupee is tracking the positive trend in equities after Wednesday’s production report reaffirmed the optimistic economic outlook,” said Roy Paul, a Mumbai-based deputy general manager at Federal Bank. “The rupee’s medium-term prospects remain bullish.”

Offshore forwards indicated the Indian currency will trade at 45.27 per dollar in three months, compared with expectations of 45.46 on Wednesday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

Industrial production increased 13.5%, after gaining 15.1% in February. Output surged 17.6% in December, the most since at least 1994.

The Reserve Bank of India forecasts gross domestic product will expand at least 8% in the current financial year, compared with an estimated growth of 7.2% in the previous fiscal.

India Tuesday 11 May 2010: The Reserve Bank of India said the Greek crisis may lead to short-term volatility in the foreign exchange market as it expects capital outflows from emerging economies like India.

RBI deputy governor Subir Gokarn on Monday said the dollar is likely to emerge stronger against all major currencies, given the huge demand for the greenback now. He expects liquidity to be adequate in the inter-bank system.

“There may be some nervousness among investors worldwide which may provoke capital outflows from emerging markets in the short-run, so there is a risk of short-term vulnerability of capital outflows,” Mr Gokarn said at a banking seminar, organised by the Indian Chamber of Commerce.

He said the market is somewhat nervous as no one really has a clue which country would get mired in a debt crisis after Greece. It is well known that there are similar debt-related concerns about Portugal and Spain.

He, however, expects stable capital inflows to India since nobody doubts India’s growth potential. “The longer-term impact of the Greece debt crisis will not be as severe as the global financial turmoil. We are getting more and more comfort from the global economy, notwithstanding Greece,” he added.

Mr Gokarn added that the central bank did not expect any pressure on liquidity in the April-September period despite high government borrowings. “We are watching the developments very closely and manage liquidity in a non-disruptive manner,” Mr Gokarn said.

India Monday 10 May 2010: The Indian rupee opened sharply higher on Monday morning helped by losses in the dollar against major currencies, with gains in shares also helping sentiment.

The partially convertible rupee was at 45.05/06 per dollar, stronger than 45.48/49 at close on Friday. Last week, it fell 2.5 per cent, its worst performance since the week of March 1, 2009, when it had dropped 3 per cent, a couple of days before hitting its record low of 52.2.

Indian shares rose 1.2 percent in early trade on Monday, with Reliance Industries and ICICI Bank leading the gains, as Asian stocks rose on a massive stabilisation plan for the euro zone to keep Greece’s fiscal woes from spreading.

The euro trimmed earlier gains after the European Union’s monetary affairs commissioner, Olli Rehn, said the European Central Bank had taken a decision to intervene in the secondary market of government securities. Most Asian currencies jumped against the dollar.

The index of the dollar against six major currencies was down 0.95 percent.

India Friday 07 May 2010: The Indian rupee dropped on Friday to over two month lows weighed by sharp falls in global stocks but dollar flows from exporters and custodian banks helped it recover from the lows.

Dealers said they were closely watching developments in Greece and the euro zone as it could be a key factor for future risk taking among investors and may impact the rupee.

US Treasury Secretary Timothy Geithner will discuss efforts to get aid to debt-stricken Greece with fellow finance ministers from Group of Seven nations Friday. At 10:25 am (0455 GMT), the partially convertible rupee was at 45.60/61 per dollar, after hitting 45.73 at open, its lowest since March 5 and below its previous close of 45.31/32 on Thursday.

At the day’s low, the rupee was down 0.9 percent on the day and has shed 3 percent this week. “We have recovered well from the day’s lows. Today’s range is a difficult call - but I think we would see a move below yesterday’s close, so range could be 45.75 towards 45.25,” said R K Gurumurthy, head of treasury at ING Vysya Bank in Mumbai.

“There is the fear of intervention that could keep traders edgy - this day is full of events and risks - UK election, Germany and others finalising aid for Greece, non-farm payrolls in the US, G7 conference call to name a few,” he added.

Traders said they would also watch the dollar’s move against major currencies for direction. The pound and the euro nursed chunky losses on Friday after a global rout sent the dollar and yen soaring, with Asian share markets falling on a Wall Street sell-off and sterling hurt by election uncertainty.

Most Asian currencies too were weaker against the dollar on Friday. Indian shares were trading down 1 percent on Friday, en route to their second weekly fall in a row, as mounting fears over Europe’s debt crisis rocked world equities and drove investors away from risky assets.

Foreign fund flows are major movers of the local stock market and also have a substantial impact on the rupee’s fortunes. So far in 2010, foreign fund investments of a net $6.2 billion have helped the rupee gain 2.1 percent.

Last year record inflows of $17.5 percent had lifted the rupee up 12.2 percent from its record low of 52.2 hit in early March 2009 while the unit gained 4.7 percent on the year.

One-month offshore non-deliverable forward contracts were quoted at 45.75, weaker than the onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were at 45.68 and 45.6825 respectively, with the total traded volume on the two exchanges at about $1.7 billion.

India Thursday 06 May 2010 - The rupee slid to a five-week low, tracking losses in Asian stocks and currencies, as investors sought the relative safety of the dollar over emerging-market assets on concern the debt crisis in Europe will worsen. The rupee slumped 0.7% to 44.94 per dollar at the close of trade on Wednesday. It dropped as low as 44.985, the weakest level since March 31. Wednesday’s decline pared the rupee’s gains this year to 3.5%, still the second-best performance among Asian currencies.

The currency dropped the most in more than two weeks as the MSCI Asia-Pacific excluding Japan Index of regional shares lost 1.7%. Bonds have tumbled in Greece, Spain and Portugal after Standard & Poor’s downgraded the countries last week amid mounting concern about their ability to cut budget deficits that are among the highest in the euro area.

“Financial markets are in a correction phase globally, thanks to heightened concerns that the European debt problems are spreading,” said RVS Sridhar, senior vice-president at Axis Bank in Mumbai. “The dollar is strengthening against almost all currencies and the rupee is no exception. We may see some capital outflows in the short term.”

Offshore forwards signalled traders increased bets for the rupee’s weakness in the coming months. They indicated the Indian currency will drop to 45.08 to the dollar in a month, compared with expectations of 44.73 on Tuesday. The Dollar Index, which the ICE uses to track the dollar against the currencies of six major US trading partners, touched a one-year high of 83.689 on Wednesday. The index jumped 1.3% on Tuesday, the most since December 4.