Rupee will settle down: Chidambaram

New Delhi: With the rupee declining to a two-month low of 63 to a dollar, Finance Minister P Chidambaram Monday assured the domestic currency will stabilise.

"Rupee will settle down," he told reporters here.

In early trade today, the rupee fell to 63.33 to a dollar, its weakest since September 18.

The Indian currency started weakening since last week after the dollar purchase by oil companies was partly shifted to the market.

"Rupee weakness is due to OMC forex demand being moved to market. 30-40 percent of OMC demand has moved to market," Economic Affairs Secretary Arvind Mayaram had said last week.

The PSU oil companies are the biggest buyers of dollars, requiring USD 8-8.5 billion every month for the import of an average 7.5 million tonne of crude oil.

In August, the Reserve Bank had opened a special window to help the three state-owned oil marketing companies -- IOC, HPCL and BPCL -- to meet daily foreign exchange requirements and buy dollars directly from RBI.

The rupee has recovered over 8 percent since August 28, when it fell to a record low of 68.85 to the dollar. The gain in rupee had followed optimism that the US Federal Reserve would delay the tapering of its bond buying programme.

Rupee to stabilise in a day or two: FinMin

New Delhi: The Finance Ministry Thursday said the rupee will stabilise within a couple of days as inflows of NRI deposits and export proceeds are likely to be strong.

"Strong FCNR (B) inflows, export realisation will strengthen rupee... Rupee will stabilise in 1 or 2 days," Economic Affairs Secretary Arvind Mayaram said.

The rupee weakened to 62.58 against the US dollar in the early trade today.

Mayaram said the weakness in rupee was due to shifting part of dollar purchases by oil companies to open market.

In August, the Reserve Bank had opened a special window to help the three state-owned oil marketing companies -- IOC, HPCL and BPCL -- to meet daily foreign exchange requirements and buy dollars directly from RBI.

"Rupee weakness is due to OMC forex demand being moved to market. 30-40 percent of OMC demand has moved to market," Mayaram said.

The PSU oil companies are the biggest buyers of dollars, requiring USD 8-8.5 billion every month for the import of an average 7.5 million tonne of crude oil.

The rupee has recovered over 10 percent since August 28, when it fell to a record low of 68.85 to the dollar. The gain in rupee followed optimism that the US Federal Reserve would delay the tapering of its bond buying programme.

To attract dollars, RBI in September had opened a special concessional window for swapping foreign currency non-resident (banks) (FCNR-B) deposits and overseas foreign currency borrowings for banks. So far USD 15.2 billion has come from this window.

The window will remain open till the end of this month, and many analysts have pegged the inflows from these instruments to be in the range of USD 20-25 billion.

The plight of the rupee started after the US Fed in its May 24 meeting hinted at shutting the easy money tap- repurchase of USD 85 billion worth of T-bills every month.

This had led to a spike in US interest rates, enticing FIIs to plumb for better returns back home by exiting emerging markets.

FIIs had sold domestic debt worth more than USD 52 billion so far in 2013

Rupee down 27 paise at 61.89 against dollar in early trade

Mumbai: The rupee lost 27 paise to 61.89 against the US dollar in early trade today at the Interbank Foreign Exchange due to appreciation of the American currency against euro overseas.

Increased demand for the US dollar from importers also put pressure on the rupee.

Dealers attributed the rupee's fall to the American currency's gains against the euro overseas but a higher opening in the domestic stock market capped the fall.

The rupee had closed 12 paise higher at 61.62 a dollar in yesterday's trade on selling of the American currency by banks and exporters.

Meanwhile, the BSE benchmark Sensex rose by 48.46 points, or 0.23 per cent, at 21,023.25 in early trade today.

India rupee up 57 paise to 61.08 dollar in early trade

 
The rupee opened strong and was trading 57 paise up to 61.08 against the dollar in early trade at the Interbank Foreign Exchange market on Wednesday as the greenback fell against other currencies overseas after the weak US jobs report fuelled hopes the Federal Reserve will keep its stimulus programme in place.

Besides, increased dollar selling by exporters and a higher opening in the domestic equity market also supported the rupee, forex dealers said.

The rupee had lost 13 paise to close at 61.65 against dollar in Tuesday's trade on sustained demand from importers and banks as investors awaited US jobs data.

Meanwhile, the BSE benchmark Sensex was trading over 100 points down in late morning trade on Wednesday.

Rupee down 27 paise to Rs 61.79 against dollar in early trade

Extending its Monday's losses, the rupee lost 27 paise to Rs 61.79 against the US dollar in early trade on Tuesday on the Interbank Foreign Exchange due to appreciation of the Greenback against other overseas currencies.

Dealers attributed the fall in rupee to gains made by US dollar against the euro and other overseas currencies ahead of US jobs data and a lower opening in the domestic equity market.

Increased demand for the dollar from importers and banks also put pressure on the local currency.

The rupee weakened by 25 paise to close at Rs 61.52 against the dollar in Monday's trade on persistent demand from importers and banks as the US currency strengthened overseas.

Meanwhile, the BSE benchmark Sensex fell 31.74 points, or 0.15 per cent, to 20,862.15 in early trade on Tuesday.

Rupee advances to 7-week high at 61.45 against dollar

Selling of the US currency by banks and exporters triggered by its weakness overseas helped the Indian rupee advance by 28 paise to a seven-week high of 61.45 against the dollar in late morning deals on Friday.

Good foreign capital inflows into equity market also boosted the rupee value against the dollar, a forex dealer said.

The rupee resumed lower at 61.85 per dollar as against the Thursday's closing level of 61.73 at the Interbank Foreign Exchange (Forex) Market on mild dollar demand from some banks.

However, it recovered immediately to 61.34 before quoting 61.45 per dollar at 1045 hours, on fresh selling by banks and exporters.

It may be recalled that the dollar was quoted at 61.32 on August 16, 2013.

The domestic currency hovered in a range of 61.34 and 61.95 per dollar during the morning deals.

In New York market, the dollar hit an eight-month low against the euro on Thursday as investors grew more concerned about the economic effects of a prolonged shutdown and debt-ceiling debate.

Meanwhile, the benchmark BSE index Sensex moved down by 29.66 points or 0.15 per cent to 19,872.41 at 1125hours, after earlier touching the 20K level.

PM-speak on rupee tumble does not have enough currency

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One area where policymakers have failed in recent years is their inability in continuing to attract long-term capital.

September 1, 2013:  

As Prime Minister Manmohan Singh embarks on an overseas visit this week to attend the G-20 Saint Petersburg Summit, he may pray and hope that the likely US action on Syria will delay the tapering of US stimulus.

The hope being that developments on Syria may prompt the US Federal Reserve to think twice about tapering in September.

For this past month, when rupee hit a record low against the dollar, Indian policy makers have tended to lay the blame for the fall in rupee on “external factors” such as the May 22 announcement of likely US stimulus tapering.

Seldom had one seen Indian policymakers and political leaders take ownership for their policy goof ups or for that matter even their policy inactions.

In this backdrop, the Prime Minister’s recent statement in Parliament on the rupee slide was seen more in the nature of excuses given by a failed student.

It was quite perplexing to note that he went the extra mile to remind the developed countries – in pursuing their fiscal and monetary policies – that they should take into account the repercussions on emerging economies.

What about India’s own domestic policy failings that had led to the current situation? ask experts from the international policy community.

This is even as they took comfort from the Prime Minister’s reassurance to the international community on his commitment to reforms and restraint from capital controls.

One area where policymakers have failed in recent years, is their inability in continuing to attract long-term capital.

India has been relying on short-term capital flows to fund its deficits.

After sleeping on the wheel for nearly four years, the UPA Government is now, in the last year of its term, pushing for several reforms that may not be fiscally prudent.

The Food Security Bill has political engineering all over it, say economy watchers. The Food Security Bill is another way of distorting prices, mis-allocating resources and adding to the fiscal burden in the longer term, says Peter Drysdale, a Professor of Economics at Australian National University.

“India’s progress through reforms has been impressive in the last two decades. But this (Food Security Bill) sends a wrong signal to the reform process.

“This and recent hardening of approach to FDI signals that a caution is needed about India’s deep commitment to the reform process.”

Lack of confidence in policy commitment is the main reason for the short-term shock now experienced by India. Any wise Government should recognise this, says Drysdale.

Fiscal discipline, commitment to openness on capital and commitment to leaving the exchange rate do its proper job are the need of the hour.

It’s not clear that the latter commitment is being taken seriously. Defending the currency may not be a right approach or a long-term solution.

Goldman Sachs cuts India GDP forecast to 4%; sees rupee at 72/USD

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New Delhi, Sept 3:  

Goldman Sachs has lowered India’s growth forecast for the current financial year to 4 per cent from 6 per cent earlier and is expecting the rupee to touch 72 against the US dollar in the next 6 months.

According to the global brokerage firm, India and most of the Southeast Asian countries are likely to see “difficult external funding conditions” as markets are anticipating US Fed tapering and eventual exit from unconventional monetary policies.

“For India, we have cut our FY’14 GDP growth forecast to 4.0 per cent, from 6.0 per cent earlier, and our FY’15 forecast to 5.4 per cent, from 6.8 per cent previously,” Goldman Sachs said in a research note.

In the near term, Goldman Sachs sees risks as the economy is likely to need an adjustment in the current account and fiscal balances, and says it “may require below-potential growth for several more quarters to reduce inflation, before we can see an economic recovery“.

The report further added that not only has data come in worse-than-expected in Q2 2013, the external funding pressure since early May was the major driving factor behind the GDP downgrade.

According to official figures, the country’s economic growth in the April-June quarter slid to 4.4 per cent, the lowest in the past several years, pulled down by drop in mining and manufacturing output.

Goldman Sachs has lowered its growth forecasts for India followed by Indonesia, Thailand and Malaysia, it said.

Meanwhile, the global broking major has also lowered its rupee forecast, and sees further real depreciation over 3 to 6 months given the challenging external funding environment and the slowdown in GDP growth.

“We change our 3, 6, and 12-month USD/INR forecasts to 70, 72, and 70 (from 60 flat) respectively,” the report said.

The rupee had touched an all-time intra-day low of 68.85 to a dollar on August 28 and is currently hovering around the 67/USD mark in highly volatile trade.

“We see further real depreciation over 3 and 6 months given the challenging external funding environment and the slowdown in GDP growth. Over 12 months, we expect some stabilisation, with the removal of election uncertainty in March-April likely to help sentiment, and adjustment in the current account in progress,” Goldman Sachs said.

Notwithstanding the fact that the global brokerage has downgraded its India forecast significantly, it remains optimistic about its long-term potential.

“We continue to believe that a rising middle class, favourable demographics, need for investments, especially on infrastructure, and productivity catch-up across a broad swathe of sectors can drive growth over the medium term,” it said.