2. The Rupee hit yet another record low on
Wednesday as worse-than-expected inflation data
and the U.S. Fed's decision to hold back on new
stimulus steps heightened fears that capital
outflows from emerging economies such as India
could accelerate.
The rupee closed at 53.71/72 to the dollar after
briefly hitting an all-time low of 54, which
represented a drop of 3.7 percent from its close
last Friday.
"We have to prepare ourselves for possibly new
lows on the rupee every day," said Naveen
Raghuvanshi, associate vice-president of
currency trading at the Development Credit Bank.
"You name a negative and it is there for the
rupee," he said. "We could see 56 by end of this
month."
3. While some traders said the Reserve Bank
of India may step into the market, any
intervention would likely have little long
term impact given India's relatively
limited foreign exchange reserves and
the host of negative factors lining up
against the currency.
India's wholesale prices rose 9.11
percent in November, leaving inflation
stubbornly high and suggesting the
central bank would hold rates steady at
its review on Friday even as worries grow
over the health of the economy.
4. C. Rangarajan, chairman of the Prime Minister's
Economic Advisory Council, said India could do
little to check the fall in the rupee, which is also
being buffeted by external factors.
5. The euro slipped versus the dollar on Wednesday
after Italy paid a euro-era record yield of 6.47
percent to sell five-year debt, adding to concerns
that an EU summit last week had made little
progress in tackling the region's debt crisis.
Sailesh K. Jha, head of Asia strategy at
Skandinaviska Enskilda Banken, said the rupee
was vulnerable because of large external debt
payments of about $20 billion due in the first half of
2012 and because importers were not effectively
hedged.
6. "We anticipate continued net outflows from the equity market into
first half of 2012 as the uncertainty on the outlook for India
growth, inflation and macroeconomic policies lingers," Singapore-
based Jha said.
The rupee, Asia's worst performing currency this year, could slip
to 55 to the dollar by the end of December and head to 57 in the
first quarter of 2012, he said.
However, the currency will probably rise modestly by the end of
next year, a Reuters poll showed.
At Wednesday's close the rupee is down about 18.3 percent from
its 2011 high in July .
One-month offshore non-deliverable forward contracts were
quoted at 54.17, indicating a short-term negative outlook for the
onshore spot rate.
7. The one-month onshore forward dollar premium was at
34.25 points, up from 33 on Tuesday. In the currency
futures market, the most-traded near-month dollar-rupee
contracts on the National Stock Exchange, the MCX-
SX, and the United Stock Exchange were about 53.92
above the spot rate.
The main stock index closed down 0.76 percent after a
choppy session as the higher-than-expected inflation
figure dampened hopes of any immediate monetary
policy easing.
While the central bank is widely expected to keep rates
on hold at its review on Friday, economists expect it to
accelerate monetary easing in 2012 as economic
conditions worsen in Asia's third-largest economy
8. BECAUSE OF FALLING SUPPLY & RISING
DEMAND FOR DOLLAR……
High current account deficit ($b)
2008-09 27.9
2009-10 38.4
2010-11 44.3
2011-12 60
9. NEED FOR STEADY CAPITAL FLOWS TO MEET
DEFICT
FII INFLOW ($ b)
2008-09 -9.95
2009-10 30.36
2010-11 32.2
2011-11 4.9
10. INTERVENTION BY CENTRAL BANK
$306.8 billion reserves mostly borrowed funds.
At 43.5% of forex reserves,external obligations are
at a ten-year high.
11. % CHANGE IN CURRENCY VALUE AGAINST $
SINCE AUGUST
Series 3
Series 3
India -21
Brazil -18
Japan -1
Russia -15
12. THE ECONOMIC IMPACT IS EVIDENT IN:
11% decline in Indian crude basket in dollar terms
negated by the rupee drop.
Rupee cost of $352.2 billion of yearly imports will
rise.
Goverment’s subsidy bill will rise about 1lakh
crore.
Interest costs will rise for companies that have
borrwed overseas.
8000 cr hit for oil marketing for ever 1
depreciation against the dollar.
