India Forex - Forex Trading in India

India Friday 30 July 2010 -The rupee touched its highest in nearly a month on Thursday, as stronger domestic stocks raised expectations of more capital inflows and the euro’s rise prompted exporters to sell dollars.

The partially convertible rupee ended at 46.53/54 per dollar, off an intra-day high of 46.52, its strongest since July 2 and around 0.5% higher than Wednesday’s close of 46.75/76. The one-year onshore dollar premium rose to its highest in two years after a senior RBI official said current policy rates will not tame inflation and aggressive action is needed.

The one-year premium was at 186 points. Sharp rate hikes in India would further widen the interest rate differential between India and other developed economies, helping attract more capital inflows and boosting the rupee. RBI on Tuesday raised interest rates more forcefully than anticipated to combat price pressures in Asia’s third-biggest economy, and signalled more policy tightening in the coming months.

The dollar’s weakness overseas also triggered fresh supply in the market due to selling by exporters. The dollar touched a 11-week low against the euro and was down 1.2% versus the Swiss franc. The dollar index was 0.6% down against six major currencies at the time of the local market’s close.

One-month offshore non-deliverable forward contracts were quoted at 46.69, weaker than onshore spot rate. In the currency futures market, the most traded near-month dollar-rupee contracts on NSE and MCX-SX ended at 46.7375 and 46.7475, respectively, with the total traded volume on the two exchanges at around $3.6 billion.

India Thursday 29 July 2010 : The rupee today bounced back by six paise to 46.69 against US Dollar in the opening session, against its previous close of 46.75, on fresh capital inflows by foreign funds and weak Dollar against other currencies, traders at the Interbank Foreign Exchange (FOREX) said.

An oscillation was seen in the local unit as it recorded the intra day’s low and high at 46.64 and 46.71 per US Dollar respectively.

The lacklustre trading in equity market restricted the rupee’s gain, they added.

The rupee had slipped by ten paise to 46.75 per US Dollar yesterday.

India Wednesday 28 July 2010 : The rupee today declined by seven paise to 46.72 per US dollar, against its last close of 46.65, in the opening trade, on the dollar’s gains against other major currencies, traders at the Interbank Foreign Exchange (FOREX) said.

A narrow movement was seen in the domestic unit as it recorded the intra day’s low and high at 46.68 and 46.74 against the US currency.

Currently, it was trading at 46.71 per US Dollar. The lackluster trading in euqity market and month-end dollar demand from importers put pressure on the rupee, traders informed.

The domestic unit had surged by 40 paise to 46.65/66 a dollar in the previous session.

Forex Asia Closing Highlights

- China: State Information Center reported that exports may gain 16.3% y/y in H2; imports 19.3% y/y; trade surplus to see $97.8 bln.

- China: PBoC deputy governor Hu Xiaolian said that moderate yuan moves can help to adjust trade and international payment unbalances while a more flexible yuan can help make China’s monetary policy more effective. He added that yuan adjustments have helped to ease imported inflation pressure and restrain asset bubbles.

- Singapore/ Malaysia/ India: Indian Fortis Healthcare accepted Malaysian state fund Khazanah’s offer of S$3.95/sh, amounting to SGD 3.5bln ($2.6bln) to buy out the remaining part of Singapore’s Parkway Holdings Ltd.; Fortis plans to sell its 25% stake in the Singapore-based firm to Khazanah. Said it would make S$116.7mln profit from Parkway sale.

- Singapore: June manufacturing output rose a softer than expected 26.1% y/y (May: 58.4% y/y); ex-Biomed +24.8% y/y (May: 29.9% y/y).

- Indonesia: BI Governor Nasution said that full year growth is seen at 5.9%; rupiah at 9200 to the dollar in 2010 and that inflation will be at the upper end of the 4-6% r ange.

- Indonesia: FinMin estimated full year GDP at 5.9%, more optimistic than the official govt forecast of 5.8%; H1 at 5.8% and H2 at 6%. FinMin added that H2 will see higher inflation, slower exports and marginally stronger investment. 2010 budget deficit is seen at 1.5% of GDP.

- Philippines: Highlights of President Aquino’s State of the Nation Address: Said will ask Congress to pass the ‘fiscal responsibility’ law that will require a revenue source for every legislation that calls for some kind of spending. Might cut some corporate tax breaks. Acknowledged renewed interests from private groups to improve infrastructure, with minimal budget support from the government; said supports partnerships with private sector.

- Philippines: BSP Gov expects July CPI to range within 3.5-4.4% on lower fuel costs and rice prices; added that the inflation outlook remains manageable.

- Philippines: Philippine stock exchange cautioned that the stock index i.e. PSI reading was incorrect after the exchange launched a new trading system today; index had surged 14%+ in pre-lunch trades; new data to be loaded after market hours.

- Philippines: Treasurer Tan said was reviewing issuance of retail treasury bonds in Aug; might raise < PHP 100bln ($2.2bln). Added that the Treasury has received proposals for peso and solar bond swaps.

- Philippines: Private pollster Pulse Asia's survey showed that President Aquino had record levels of public trust, with over 85% of the respondents supportive of the Preside nt.

- Philippines: Budget Secy Abad added that the administration only had 38% of the 2010 budget left, making it very difficult to adhere to 2010 deficit goal. Estimated PHP 100bn could be reallocated to meet social services and education spending requirements.

- India: Credit ratings agency Moody's upgraded the local bond ratings for India by one notch to 'Ba1' from 'Ba2'; foreign currency bond ratings were affirmed at 'Baa3'; credit outlook for foreign and local currency bonds have remained put at 'Stable' and 'Positive' respectively.

- Japan's Your Party chief Yoshimi Watanabe says Japan govt needs to weaken JPY, more BoJ easing and undertake expansionary fiscal policy to beat deflation.

- Australia: PM Julia Gillard has dismissed the need for a second leaders debate with Tony Abbott despite saying election remains a "tough, close contest". Commentators were split over who won the head-to-head match-up. - Daily Teleg raph

USD/Majors: EUR rallied to 1.2955+ highs as the Sterling hit 1.55-levels and as the AUD tested 0.8990 fuelled by risk-on moves. Sovereign buyers were cited along with interest in the market to take out options above, but momentum did not last. S&P futures turning lower along with EUR coupons and redemption being watched knocked the EUR off the highs and the tumble also dragged the GBP and AUD - albeit to a lesser extent than the EUR which was at the bottom of the pack. EUR was pressured below 1.29-figure while GBP and AUD consolidated sub-1.5480 and 0.8080-ish levels respectively. Sovereign sellers, including Asian names were on the offer for the EUR/USD.

JPY Crosses: came under selling pressure in early European hours today; risk appetites showing signs of pullback added to the downtrend as well. EUR/JPY was further weighed by JPY repatriation on French BTAN/ OAT coupons and redemption due today. AUD/JPY extended slippage from morning trades on speculation of RBA pause. Nikkei closed off highs at +0.77% as regional bourses trimmed gains into Asia close.

USD/Asians: USD/AXJ bounced off lows rather swiftly as EUR's late afternoon rally fizzled out (last seen sub-1.29 terrain), weighed by assorted offers (mainly a large Asian name also known for as user of big option structures) and as concerns over the nuances in EU stress tests revived risk-off interests on the margin. Equities also narrowed gains near close, with few still-open indices extending slip into red.

Oil weighed on global recovery concerns again. Crude oil last traded at $78.60/bbl.

Gold recovered a tad from overnight lows on speculation about physical demand. Spot gold trading at $1190.65-1191.65/oz at last indication.

NORTH ASIA
USD/KRW: Intervention-type of moves put the brakes on USD/KRW bears that were headed for a break below the 1190-handle; integrity of the level remained and trades ended a tad above 1191.

USD/CNY: Spot prices continued to trade near the 6.78-figure into closing; 1-year NDFs came off 6.68-ish lows into Asia close as dollar slump eased.

USD/HKD: Pair bounced off lows to 7.7665+ as stocks gave up part early gains and dollar index steadied.

USD/TWD: The pairing slipped below the 32.100-mark in afternoon trades on the soggy dollar and bounced to close at 32.120 on dollar recovery and suspected intervention.

SOUTH ASIA
USD/SGD: Good US names on the offer saw USD/SGD hitting 1.3626 lows but bounced off as EUR stumbled off 1.2958 highs.

USD/MYR: bit of a bounce in the USD/MYR in sympathy with the USD/SGD as risk appetite at the margin waned; MYR gave back some of the gains against the SGD.

USD/IDR: Prices softened to 9030-ish levels in pm trades on the dollar slippage though stock losses kept downsides checked.

USD/PHP: Prices slipped to 46.12 lows on return from lunch as EUR was buoyed by early European offers, though USD/PHP got off its back to close at 46.145 as EUR bounce faded. Stock index was down on technical issues, with market data expected to be uploaded after trading hours.

USD/THB: Markets were closed for Asarna Bucha Day; normal trades resume tomorrow.

USD/INR: Whippy moves as pair dribbled to 46.81 lows in wake of EUR’s late afternoon rally, though with SENSEX deepening slide and EUR off highs, USD/INR shot higher to 46.99 highs; last seen at 46.96.

India Tuesday 27 July 2010: The Indian rupee gained 18 paise to 46.86 against the US dollar in early trade on the Interbank Foreign Exchange today amid a fall in the value of the American currency against its major rivals.

Capital inflows by foreign funds into equities, too, supported the rupee sentiment.

The rupee had closed 11 paise lower at 47.04/05 against the dollar in yesterday’s volatile session.

Forex dealers said apart from dollar losses overseas against a basket of currencies, foreign capital inflows into Indian markets also provided support to the rupee.

However, the cautious approach exercised by investors ahead of the Reserve Bank of India’s monetary policy review, which is scheduled later in the day, restricted the gains.

Meanwhile, the Bombay Stock Exchange benchmark Sensex rose by 57.09 points, or 0.31 per cent, to 18,077.14 points in opening trade today.

India Monday 26 July 2010: The rupee was largely steady in early trade on Monday holding near recent 1-week highs tracking a seesawing local share market with traders watching the dollar’s moves versus majors for further direction.

At 9:15 am the partially convertible rupee was at 46.92/93 per dollar, little above its Friday’s close of 46.94/95, when it had risen as high as 46.8925, its strongest since July 16. So far the rupee has traded in a range of 46.90 to 46.9550. Markets opened down 0.2 percent but soon turned positive. The euro kept to a tight range in Asian trade, with some scepticism about the credibility of the euro zone’s stress tests on its banking sector keeping investors sidelined.

The index of the dollar against six major currencies was little changed and would be watched for cues, dealers said. The Reserve Bank of India is widely expected to raise key interest rates by 25 basis points on Tuesday.

Rate hikes could temporarily hurt the rupee if stocks fall, but in the long run would help the rupee gain due to the interest rate differential.

India Saturday 24 July 2010: The Reserve Bank of India (RBI) on Friday issued revised draft guidelines on foreign exchange derivatives and overseas hedging of commodity price risk and freight risk, inviting comments and suggestions.

Among the products that can be used are forward foreign exchange contracts, cross currency options (not involving the rupee), foreign currency-rupee options, foreign currency-rupee swaps, cost reduction structures, cross currency swap, interest rate swap, coupon swap, interest rate cap or collar (purchases) and forward rate agreement, according to the guidelines.

The products specified by RBI also include forward foreign exchange contracts, cross currency options (not involving the rupee) and foreign currency-rupee options. The RBI said in a statement that in the light of developments in the domestic and international financial markets, the extant guidelines on OTC foreign exchange derivatives has been reviewed.

The draft guidelines, interalia, proposed to withdraw the facility of zero cost /cost reduction structures, permit importers and exporters having foreign currency exposures in trade transactions to write covered call and put options both in foreign currency-rupee and cross currency and also receive premia. Corporates having global business had represented to the Reserve Bank that prohibiting zero cost structures would seriously impede their forex risk management operations and global competitiveness.

Further, if such structures were banned, some corporates may not hedge their currency exposures due to cost consideration and this may lead to aggregation of unhedged position, which is riskier than hedging within a range. Hence, they represented that cost reduction structures may be permitted, with suitable safeguards, such as higher net worth and a suitable risk management policy. Some categories are permitted under special dispensation, including small & medium enterprises (SMEs) who may be permitted to book forward foreign exchange contracts without production of underlying documents for hedging their direct /indirect exposure to foreign exchange risk.

The draft guidelines suggest that foreign institutional investors (FIIs), persons having foreign direct investment in India and non-resident Indians (NRIs) be allowed to hedge their contracted foreign exchange exposures through Forward Foreign Exchange Contracts and Foreign Currency-INR Options.

Authorised dealers, the guidelines say, can hedge to manage assets and liabilities, gold price risk and currency risk on capital.

The guidelines add that residents are permitted to use OTC and exchange-traded commodity derivatives in international markets for hedging their exposures to commodity price risk subject to conditions.

India Saturday 24 July 2010 - Huge forex gains pushed up Wipro’s net profit on a yearly basis by 31% to Rs 1,319 crore in the first quarter-ended June 30.
However, the third largest information technology (IT) company delivered subdued revenue growth, with underlying volume rise of 4.7% — lower than the 7-8% volume growth of peers Infosys Technologies and Tata Consultancy Services.

Analysts were a wee disappointed by the company’s performance on the revenues front.

Bhavtosh Vajpayee and Nimish Joshi of CLSA said Wipro has expectedly not provided the fireworks on the revenue front in the June quarter, growing 3.2%QQ (quarter-on-quarter). “The score card from the top-3 Indian IT service vendors reads 2-1 on revenue performance,” they said.

Rajiv Mehta, AVP- India Private Client, IIFL, was also left unimpressed on that count. “In comparison to Infosys and TCS, Wipro’s headline performance is modest,” he said.

Another analyst with a foreign broking firm, who did not want to be named, said “Wipro’s performance in the quarter is nothing to write home about.”

Wipro’s revenue from IT services, products and consumer care business grew 16% year on year (YoY) to Rs 7,236 crore and 3.2% sequentially.

The company has projected a 4.1-6.1% quarterly revenue growth in dollar terms for its global IT services business.

Azim Premji, chairman, Wipro Ltd, dismissed any concerns on double dip recession and expects pricing environment to improve with rebound in demand for outsourcing in the Western economies.

“In our estimate, there will not be a double-dip recession. We are seeing traction, and decision making is on. We are now seeing reasonably sound indications that discretionary spending is back. We are seeing price stability also. We have given discounts to customers in the past they will give us price increases going forward,” he said.

The company’s onsite pricing (constant currency) in the quarter fell steeply by 3.5% while it’s offshore pricing tumbled 0.1%.

Girish Paranjpe, joint chief executive officer of Wipro, said price realisation had been impacted by adverse cross currency movement and transition costs that were incurred onsite for new projects.

“It (price realisation) had nothing to do with underlying price environment. It was impacted by cross currency (shifts). The other factor was when you have such volume growth it is led by large projects kickoffs. When you start new projects, there is an investment you have to make upfront by putting people on transition and early project investment and those are not paid for directly (immediately). Although on full project life cycle basis, it will get paid but initially there is no corresponding revenue. So, it looks like prices have fallen when actually prices have not fallen,” he said.

Wipro’s voluntary attrition rate scaled up to 23% in the June quarter, up from 17% in the fourth quarter of last fiscal. Its attrition on a trailing 12 month basis moved up to 15.8% from 12.1% during the same period.

Analysts attribute the high employee turnover to the company’s lower wage hikes than its rivals. Wipro offered wage hikes of 9-10% in February, lower than the 13-15% offered by Infosys and TCS in April.

UBS Investment’s Diviya Nagarajan in her report brought out on Friday said Wipro will have go in for upward revision of salaries to retain skills and pin down attrition.

“We believe it is likely that Wipro will need to increase wages (either fixed or variable) given the high demand for employees with 3-8 years of experience, and is unlikely to be immune to the wage pressures facing the sector,” she wrote.

The company is looking at promoting 20,000 workers in the September quarter. This, Paranjpe said, would be accompanied by 6-10% increments. Analysts said this hike would have a 1% impact on margins.

CLSA’s Vajpayee and Joshi believe the near-term concerns for the company would be margin management in the face of RSUs issuance, implementation
of promotions, declining utilization and pricing pressure.

Meanwhile, the company is studying the possibility of launching a second American Depository Receipt (ADR) issue in the light of recent change in the regulatory guideline that makes it mandatory for companies have minimum 25% public shareholding. Wipro promoter Azim Premji and his family currently hold around 79% stake in the company.

India Friday 23 July 2010 : The rupee today resumed at a week high of 47.08 against US dollar, on fresh selling pressure of dollar by local operators in view of better trend in equity prices, traders at the Interbank foreign Exchange (FOREX) said.

Later, it oscillated in a narrow range between 46.97 and 47.10 in intra day trade. The domestic unit is currently trading at 47.09, on sustained demand by foreign funds.

”In an effort to calm investors’ jitters over the potential impact of the euro zone debt crisis on Europe’s banking system, regulators are assessing how 91 banks across Europe would cope with another economic downturn, and the results are expected to be published on Friday. There is only some oxygen being provided by the global markets to sustain till policy on Tuesday,” the chief dealer with a state-run bank said, a dealer said.

”The unit should trade in a range of 46.90-47.15 today and the stress test results will be watched, but no one is seriously very concerned about them now. Unless they are really negative, they are discounted,” the chief dealer with a state-run bank said.

The euro steadied against the dollar today, retaining gains made in the previous day on strong euro zone data and US corporate earnings. The index of the dollar against six major currencies was down 0.1 per cent and would be watched for direction during the day.

Most Asian units too rose against the dollar.

India Thursday 22 July 2010 - The rupee rose the most in more than a week, rebounding from a six-week low, after foreign funds raised holdings of local stocks and bonds to record levels.

The currency strengthened 0.4% to 47.175 per dollar at the close of trade on Wednesday, paring this week’s loss to 0.9%. It touched 47.385 on Tuesday, the weakest level since June 7.

The currency snapped a three-day slide as data from the Securities and Exchange Board of India showed foreign investment in equity and fixed-income securities touched all-time highs of $81.5 billion and $15.4 billion, respectively, in the past week.

The rupee also advanced as the BSE Sensex climbed 0.6%, the best gain since July 12. “The rupee is showing some recovery because capital inflows have remained consistently positive, helped by India’s better economic fundamentals,” said Roy Paul, deputy general manager at Federal Bank in Mumbai.

Offshore forward contracts indicated the rupee will trade at 47.84 to the dollar in three months, compared with expectations for a rate of 47.99 on Tuesday.

India’s economy may expand 9.4% in the year ending March 31, the fastest pace since 2007, the International Monetary Fund said this month. That will help domestic companies boost earnings by as much as 25% this year, according to Mirae Asset Global Investment.

The rupee will strengthen in the next 18 months as the global economy stabilises and the Asian nation’s growth continues, according to Wells Fargo & Co.

“Once global investor sentiment becomes more stable, India’s robust growth profile and rising interest rates should attract foreign capital flows, putting upward pressure on the currency,” Vassili Serebriakov, a currency strategist at Wells Fargo in New York, wrote in a research note on Tuesday.

The rupee will strengthen to 43 per dollar in 18 months, Serebriakov wrote.