Indian Rupee depreciation against Dollar

[cir]

Don't worry we will be fine......Fat lady has already started singing in China and all Fat ladies are onto China for singing......enjoy the flight of capital and manufacturing contracts coupled with Ghost towns LOL

Ghost towns? Where? According to some western press?

lol! You are so easily fed what the western propaganda machine wants you to believe.

Come to China and see for your own eyes.

By the way, China is slowing down a bit because the government want it that way. Having inflation in check is our top priority for now. The CPI has fallen dramatically in the last few months and is likely to drop to circa 4% soon. This should enable China to start lowering bank reserve ratio(now at historically high of 23%) and interest rates, with a resultant pick-up in the economy. As for the property market. No worry there, for the majority of real estates are bought in CASH in China. With the new policies in place, even first time buyers who have mortgages are required to put up 30-40% of the purchase price. These physical assets are much better investment than cash in a savings account in this age of high inflation. Smart people do that.

China's problem is that there is too much cash in the economy. India's problem is the reverse. The recent performance of rupee speaks volumes.

For obvious reasons, the West wish a China that is collasping and disppearing into oblivion. Just don't be misled and misinformed.

Sorry to disppoint you guys: China will continue to march forward.

 

[Ray]

China Shining.

Here is a report of how it is happening in China.

SEASON OF STRIKES
CHINA DIARY -Neha Sahay

Rarely do the Chinese witness what is a common occurrence in India — mounds of garbage on the main roads of big cities. Most Chinese metropolises are clean, with garbage bins found at regular intervals, and streets swept throughout the day. However, this time, the garbage piles were so huge that vehicles had to swerve to avoid them, causing traffic jams in a city already notorious for them. Shops found garbage strewn all along the road in front of them; commuters couldn't wait at bus stops, thanks to the trash lying there; on narrow streets, the garbage occupied more than half the space.

This happened in the provincial capital of Nanjing, when its sanitation staff went on strike, an almost unheard-of phenomenon. Protesting against low salaries (2,000 yuan) and an overdue performance-linked package, the workers began emptying garbage bins wherever they were located, specially in the touristy Drum Tower district. The strike began at 1 pm on November 16, and lasted for two days. Emergency staff had to be sent to clear the mess.

This is turning out to be a season of strikes. Taxi drivers have struck work in five cities in the last two months, protesting against rising fuel costs and illegal taxi operators. Their earnings are down to 70 to 80 yuan a day, they say, not enough to meet the rising costs of food and house rent. Early this month, support staff hired by a private company stopped work in a Shanghai hospital, forcing patients to push their own trolleys. They wanted their demand for pension — pending for the last seven years — to be met immediately. The day after Nanjing's sanitation workers were emptying garbage bins on the roads, thousands of shoe-factory workers were out on the streets in the industrial hub of Dongguan in Guangdong. Their factory had suddenly put up a notice stopping all bonuses and overtime; this followed the dismissal of 18 middle management staff three weeks earlier.

Labour pains

The Taiwanese-owned factory supplies shoes to many well-known brands, chiefly the US's New Balance. The management cited decreasing production; however, the striking staff alleged that the owners planned to shift out of Guangdong — where labour is no longer cheap — to Jiangxi, one of China's poorest provinces where labour is the cheapest. For two hours, workers gheraoed the factory, blocked the main road and tried to march to the government building. But they were prevented by the police; 10 workers were injured in the confrontation.

But perhaps the most dramatic action by workers took place on November 14, when employees of Pepsi bottling plants in five cities "took leave" simultaneously. Alarmed at the impending takeover of Pepsico by a Taiwanese giant, the workers launched an online campaign directed at their colleagues in all 24 Pepsi plants across the country. Their demand: their jobs and working conditions should not be affected by the takeover. A Guangzhou daily reported that the heads of both the companies involved gave out statements that for two years, no contracts would be changed.

Chinese workers' right to strike was removed from their constitution in 1982, when Deng Xiaoping was inviting global manufacturers to his country. But early this year, a Guangdong-based businessman and legislator proposed that it be restored so that orderly negotiations could resolve the frequent flash strikes. Indeed, the lack of workers' representatives is one major reason for strikes turning unruly. A senior French manager of a major engineering giant compared labour unrest in Calcutta and China. In the former, you immediately called the union leaders for negotiations; in the latter, workers shouted slogans, gheraoed the factory and you didn't know whom you should talk to.
The Telegraph - Archives

Therefore, if this report from China is correct, then things are not quite that rosy out there.

What goes up has to come down or so it appears.

 

[Yusuf]

And this rant is relevant to this thread because????

 

[ice berg]

Rupee and the bears

India's currency

Rupee and the bears

What the mini-run on the rupee says about India

Nov 26th 2011 | MUMBAI | from the print edition

THE result of headless-chicken financial markets or a canary in the coal mine? India is grappling with this question. On November 22nd the rupee fell to an all-time low against the dollar. The speed of the rout (see chart) has been scary for a place that was supposed to be largely insulated from the rich world's troubles. It is 20 years since India had a balance-of-payments crisis and for a long time the talk has been about it becoming an economic superpower. But there lingers a memory of when it felt it was a financial hostage to the world, and this helps explain the whiff of panic now in the air. Mumbai's financial types say that firms are scrambling to find dollars and that desperate euro-zone banks, which supply about half of India's foreign loans, are cutting off credit lines.

That sense of fear strikes some as overdone. Jonathan Anderson, of UBS, a bank, has tagged the rupee a "drama queen". India's high inflation and chunky current-account deficit, financed by capital flows, mark it out from most of Asia. But neither attribute is new. Chetan Ahya, an economist at Morgan Stanley, thinks India has its problems, but that the weak rupee mainly reflects the trauma in global markets, which has caused capital flows to dry up. Hardest hit by global risk aversion are countries with external deficits. The currencies of other places with current-account gaps, such as South Africa and Turkey, have been walloped too.
To be sure, the rupee deserves a beating, given how India's prospects have dimmed. "The currency markets have been late in reacting," reckons Samiran Chakraborty, of Standard Chartered, another bank. "The Indian business community has been more negative than foreigners for some time," adds Roopa Kudva, the boss of CRISIL, a ratings and research firm. India's growth model has been to run a small current-account deficit, financed with high-quality capital inflows, such as foreign direct investment and equity purchases. As a poor country this makes sense: India should invest more than it saves. But bits of its approach look rickety.
For a start the current-account deficit is likely to overshoot projections of about 3% of GDP for 2011, if October's trade figures are anything to go by. Exports slowed faster than imports, a chunk of which are non-discretionary commodities and oil. The investment climate has soured due to stubborn inflation, high interest rates and GDP growth that may dip below 7% in the coming quarter. Pessimism about the government's appetite for reform has surely hurt India's ability to attract capital. Neelkanth Mishra, a strategist at Credit Suisse and a longstanding bear on the economy, reckons the quality of capital coming in is falling too, with flightier and riskier debt rather than stickier equity investments.
The falling rupee, then, partly reflects India's economic failings. But will a cheaper currency add to these problems or help solve them? It should eventually narrow the external deficit, by boosting exports and limiting imports. Still, a sharp fall in the currency can be deadly if a country has borrowed in other people's money. India's indebted government sells its rupee bonds to locals, mainly banks, not jittery foreigners. The trouble is that since India's banks are forced to stuff themselves full of loans to the state, Indian firms have had to borrow abroad. Sanjeev Prasad at Kotak, a broker, says that the recent results season saw a host of firms booking losses as the value in rupees of their foreign debts rose. He worries about them being able to refinance these borrowings.
And a lower rupee will fan inflation, which is already at 9-10%. The Reserve Bank of India (RBI), India's central bank, and the government have been praying that it will slow. But a rough rule of thumb is that a 10% depreciation adds 60-100 basis points to inflation, says Mr Chakraborty at Standard Chartered. That's unhelpful.
For the authorities there are three possible responses. They have already done the first: easing the rules on foreign lending to India, to try to attract short-term funds. The second option would be to intervene in the currency markets by selling dollars and buying rupees. That might, though, complicate domestic policy, by tightening monetary conditions further. If the RBI bought banks' rupees then those lenders would have fewer available to buy government bonds, further increasing the already high borrowing costs of the state. The RBI could try to offset this by buying government bonds directly, but that might in turn hamper its efforts to support the rupee.

And has India enough firepower? The country has $314 billion of reserves, largely thanks to the central bank intervening in the past to stop the rupee appreciating too much. But that cushion is not as big as it seems. Mr Mishra reckons foreign debts that must be repaid within a year now equal 48% of India's reserves. Using a similar approach of deducting short-term debts from reserves, Mr Anderson reckons India's net position has deteriorated. Compared with other countries it is only middlingly good (see chart) and the RBI may be nervous of using too much ammunition.
That leaves a third option: for the politicians to make tough choices. If it cut its fiscal deficit the state would probably lower the current-account deficit. And if reforms were sped up, growth might recover, inflation could fall and foreign investment would pick up. The priorities include freeing the supply chains that have caused high food prices and cutting the red tape that is choking industrial projects. So far the omens are not promising. On November 22nd, the first day of the winter sitting of India's parliament was adjourned due to raucous behaviour. Sadly, the rupee is not the only drama queen around.
www.economist.com/node/21540263
from the print edition | Finance and economics

 

[trackwhack]

Thats right ice berg, we dont manipulate our currency ... unlike China

 

[ice berg]

Thats right ice berg, we dont manipulate our currency ... unlike China

Tell all your ppl who have to pay higher price for imports. And frankly I couldnt care less you manipulate currency or not. All countries does that. It is a question of more or less. Maybe you need a course in basis economy.

 

[Singh]

Thats right ice berg, we dont manipulate our currency ... unlike China

so ? there is no reward for good behaviour !!

 

[Dovah]

so ? there is no reward for good behaviour !!

Bragging rights on forums?

 

[Iamanidiot]

How bad is it for the importers actually?

 

[Yusuf]

How bad is it for the importers actually?

Customers not lifting any material. Wait and watch approach. importers like me who have fixed orders and shipping schedule is piling on inventory at high cost and if the competitor has no order, he will wait till things become clear. If dollar falls, i am screwed, competitor is happy to sell at lower price. Tough going.

Forgot to mention rise in inventory cost by 20% as input cost has gone up. Those borrowing from banks will have to pay more interest as they will have to take more loans for purchase. If there is no sale as cited above, then you will struggle with loan and interst repayments.

 

[Iamanidiot]

Even the steel market seems to be pathetic

 

[Adux]

Bragging rights on forums?

Indians and their moral grandstanding has cost this country and civilization quite a bit.

 

[Pintu]

The Hindu : Business / Economy : Rupee may strengthen slowly

 

[pmaitra]

Thats right ice berg, we dont manipulate our currency ... unlike China

And printing money out of thin air is not manipulation of currency? If India was not manipulating currency, how is it that the rupee has been sliding ever since independence?

 

[Pintu]

Rupee fall due to global economic uncertainty, says govt<?xml:namespace prefix = "o" ns = "urn:schemas-microsoft-comfficeffice" /><o></o> - www.ddinews.com

Rupee fall due to global economic uncertainty, says govt

The government on Tuesday attributed the sharp fall in rupee against the US dollar to global economic uncertainty and supply-demand mismatch.

"The main reason for depreciation of rupee against the US dollar is uncertain global economic environment, particularly unfolding of eurozone sovereign debt crisis, which has impacted the level of foreign institutional investment flows in the foreign exchange market," Finance Minister Pranab Mukherjee said in a written reply to Rajya Sabha.



He further said: "The fluctuation in rupee exchange rate has been due to changing supply-demand balance in the domestic foreign exchange market."


Mukherjee said in 2011 so far the rupee has depreciated by 14.8 per cent from Rs 44.67 per dollar on 3rd January to Rs 52.42 per dollar on 25th November.


"The exchange of rate of rupee is basically determined by the demand and supply conditions in the foreign exchange market. The Reserve Bank constantly monitors the developments in the foreign exchange market and intervenes through purchase or sale operations only with objective to curb excessive volatility and to restore orderliness in the market without targeting any specific rate of band," Mukherjee said.


The rupee touched a historic low of 52.73 this month against the dollar.



The Indian rupee closed on Tuesday down by seven paise to settle at 52.02/03 against the American currency on weakness in local stocks amid fresh dollar demand from importers.


Forex dealers said fresh dollar demand from importers, mainly oil refiners, to meet their month-end needs weighed on the rupee.



The rupee is the fourth-most depreciated currency in the world and the most depreciated in the Asian continent.



A weaker rupee is a matter of concern for India as it depends on imports for over 70 per cent of its oil and gas requirements and the depreciation of the local currency has made imports more expensive.



The depreciation of the rupee comes at a time when headline inflation has remained above the 9 per cent-mark for 11 consecutive months.


Earlier this month, RBI Deputy Governor Subir Gokarn had said the apex bank will intervene in the foreign exchange market only to arrest volatility.



(SP-29/11)

 

[Pintu]

Rupee logs biggest 1-day gain in more than 2-1/2 yrs - www.ddinews.com

Rupee logs biggest 1-day gain in more than 2-1/2 yrs

The rupee surged 1.4 percent on Thursday and posted its largest single-session rise since May 2009, powered by hopes of dollar inflows, a day after the world's six major central banks announced co-ordinated action to help ease the euro zone crisis.

Strong gains in local shares, mirroring global equities, and the euro's sharp climb buoyed the rupee, traders said.

Robust interest from foreign investors at the debt limit auction on Wednesday added to the sanguine outlook on dollar inflows and boosted the local currency, they said.

The enhanced $10 billion debt limit for foreign institutional investors (FIIs) received bids worth $14 billion, four market sources said on Wednesday.

The partially convertible rupee ended at 51.46/47 per dollar, after gaining as much as 51.40 -- a level last seen on November 18 -- in early trade. It had closed at 52.20/21 on Wednesday.

The local currency had last witnessed such a sharp rise on May 18, 2009, when it climbed more than 3 percent on the back of a 17-percent surge in local equities, after the re-election of the Congress party-led ruling coalition.

The U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said on Wednesday they would lower the cost of existing dollar swap lines by 50 basis points from December 5, and arrange bilateral swaps to provide liquidity for other currencies.

RUPEE STILL VULNERABLE

Despite the rupee's strong performance on Thursday, the local currency was still open to a correction, traders said.

"After Wednesday, market is hoping for bigger and better things from ECB and European policy makers to help the euro zone out of the debt crisis," said Priyanka Kishore, forex strategist at Standard Chartered Bank.

"But portfolio flows are unlikely to be a one-way bet, until more concrete progress is made on solving the euro zone crisis. So rupee remains vulnerable to bouts of risk aversion."

Foreign funds are still net sellers this year of $527 million of local shares as of Tuesday, compared with a record investments of more than $29 billion in 2010.

The rupee had declined 6.7 percent in November and is the worst performer among Asian peers this year.

Traders said gains in the euro too were expected to be limited ahead of next week's summit of European Union leaders and could cap the rupee's rise.

"Euro still looks vulnerable and the dollar inflow has to materialise for the rupee to see continued rise. Domestic factors like trade deficit, slowing growth, remain negative," said a senior forex dealer with a private-sector bank.

The euro was at $1.3473 at end of rupee trade, while the index of the dollar against six major currencies was at 78.276 points.

The one-month offshore non-deliverable forward contracts were quoted at 51.76.

The one-month onshore forward dollar premium was at 27.75 points from 28.75 on Wednesday, the three-month was at 67.25 points from 64, and the one-year premium was at 186.50 points, from 165.25.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange ended at 51.70, while on the United Stock Exchange and the MCX-SX they both ended at 51.71. The total volume at $5.08 billion.(BJ-1/12)

 

[amoy]

Rupee in a free fall - do u folks see any connection to recent opening up to FDI in multi brand retailing? or merely coincidence?

 

[Bangalorean]

Rupee in a free fall - do u folks see any connection to recent opening up to FDI in multi brand retailing? or merely coincidence?

No relation between the two.

In fact, the FDI announcement came after the 'free fall' started.

 

[nrj]

Just in, no capital control to check rupee slide

 

[Daredevil]

Our foreign exchange reserve ratio as percentage of GDP has come down from 15% to ~8% due to flight of FIIs and lack of FDIs in recent times. As a result we are seeing rupee fall down. Also there is lot of speculation in the forex market which is making the rupee to fall down.