seedhi Posted June 26, 2013 Posted June 26, 2013 Rupee sinks to record low, ends at 60.72 against dollar The rupee breached formidable resistance of 60 to the dollar to slump to a record low on Wednesday, reinforcing the vulnerability of a country with limited reserves and struggling to narrow a record-high current account deficit. The rupee's fall in the afternoon session was swift despite a feeble attempt by the Reserve Bank of India (RBI) to defend the currency as end-of-month dollar demand from importers triggered stop-losses at around 60 the dollar that accelerated rupee falls. The faltering currency hit bonds and stocks as foreign investors, worried about an early end to US stimulus and looking to see their returns eroded, have sold a combined net of more than $6 billion in both markets so far this month. The problems are being compounded by perceptions India is ill suited to defend the currency in the near-term. The RBI has around $291 billion in currency reserves, enough for only seven months of import cover. The government has promised measures to attract foreign investment, but remains hampered by a perception that previously announced measures such as opening up the retail sector have faltered in their implementation. "The advertised reason is the current account deficit, but this has been purely an excuse by markets," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. "The real fact is that the market has attempted to take on the RBI by adding the pressure to intervene and to identify how much resolve the RBI has to defend the 60 level," he added, noting the rupee slumped once the central bank was unable to defend it. The partially convertible rupee fell to an all-time low of 60.76, breaching the previous low of 59.9850 hit on June 20. It closed trading at 60.7150/7250 versus its Tuesday close of 59.66/67. The rupee fell 1.8 per cent for the day, the worst performance of the day among emerging Asian currencies and has slumped 11.3 per cent since the start of May. India is due to post current account deficit data for the first three months of the year on Friday, and any data that shows that gap has not narrowed from a record high of 6.7 per cent of gross domestic product in the October-December quarter could spark more selling in domestic markets. For now, a cautious RBI is likely to remain the first line of defence. The apex bank was seen intervening on more than one occasion on Wednesday to stem the fall, selling dollars via state-run banks, but failed to prevent a slump. The central bank has also been asking banks about the nature of flows and intraday open positions, which is being eyed by traders as a potential precursor for rules mandating a cut in speculative trades. The RBI did that in December 2011 when it mandated lenders to reduce their intraday net open positions by 50-75 per cent. "The RBI now needs to come out with administrative strictures to cut speculation, curb excessive import/foreign currency loan hedges and take oil imports out of the market," said Moses Harding, head of asset liability management at IndusInd Bank in Mumbai. The government is also due to announce measures such as opening up the telecom and defence sectors for foreign investment, adopting the same playbook in September when the country sparked a rally in markets by opening up the retail and aviation sectors to foreign investment. By contrast, promises to adopt measures have so far failed to encourage investors. Bond yields jumped on Wednesday, with the 10-year bond yield rising 8 basis points to 7.58 per cent, its highest since May 14. India's fixed income association relaxed trading bands for government bonds for Wednesday's session after some of the debt hit their upper yield circuits, dealers said. Interest rate swaps also surged with the benchmark five-year OIS rate 14 bps up at 7.44 per cent, while the one-year rate closed 10 bps higher at 7.53 per cent. The BSE Sensex ended down 0.3 per cent. Copyright @ Thomson Reuters 2013 The rupee has simply been demolished by the UPA's profligacy.
FischerTal Posted June 27, 2013 Posted June 27, 2013 say thank you to the economist Prime Minister :bow:
ravishingravi Posted June 27, 2013 Posted June 27, 2013 It can even be 70 in 3 months time. There is no stopping from hereon. Botom line is, that hedge funds and FIIs have lost confidence in India story. There are of course other factors but our domestic situation was primary reason for us being worst hit of all emerging markets. CAD situation, lack of reforms, GDP, scandal after scandal, Vodafone, FIPB, almost anything that could deter an investor is in this story. Right now US economy seems to recovering rather well.
FischerTal Posted June 27, 2013 Posted June 27, 2013 It can even be 70 in 3 months time. There is no stopping from hereon. Botom line is' date=' that hedge funds and FIIs have lost confidence in India story. There are of course other factors but our domestic situation was primary reason for us being worst hit of all emerging markets. CAD situation, lack of reforms, GDP, scandal after scandal, Vodafone, FIPB, almost anything that could deter an investor is in this story. Right now US economy seems to recovering rather well.[/quote'] our economy is meh. unemployment is still very high. more people are leaving the workforce. the GDP in Q1 of 2013 grew only at 1.8 percent.
The Outsider Posted June 27, 2013 Posted June 27, 2013 It can even be 70 in 3 months time. There is no stopping from hereon. Botom line is' date=' that [b']hedge funds and FIIs have lost confidence in India story. There are of course other factors but our domestic situation was primary reason for us being worst hit of all emerging markets. CAD situation, lack of reforms, GDP, scandal after scandal, Vodafone, FIPB, almost anything that could deter an investor is in this story. Right now US economy seems to recovering rather well. Nothing to do with Hedge funds. Hedge funds will take a short position on any underlying as readily as a long position. The main reason is the sluggish economy coupled with the problems in Europe and China. At present, US is the only major economy showing major indicators as positive.
Clarke Posted June 27, 2013 Posted June 27, 2013 So I believe the govt is actively working on improving domestic oil/gas production and has plans to address the insatiable appetite for gold :hmmm:
ravishingravi Posted June 27, 2013 Posted June 27, 2013 Nothing to do with Hedge funds. Hedge funds will take a short position on any underlying as readily as a long position. The main reason is the sluggish economy coupled with the problems in Europe and China. At present' date=' US is the only major economy showing major indicators as positive.[/quote'] A lot to do with them. Atleast from my interactions with few of them. I don't know when was last time circuit breaker had to be put in debt market in India. As we speak, the FII outflows continue. Economy has been sluggish for some time. India has had CAD problem for few years now. Rupee has dropped from 54 to 60 in 2 months. Yes, the Bernanke statement was trigger. But there is little denying that the oversold India growth story has not been backed by results and investors are pulling out big time. There is also a liquidity issue with Dollars shortage in market not unlike an year or so back.
The Outsider Posted June 27, 2013 Posted June 27, 2013 A lot to do with them. Atleast from my interactions with few of them. I don't know when was last time circuit breaker had to be put in debt market in India. As we speak, the FII outflows continue. Economy has been sluggish for some time. India has had CAD problem for few years now. Rupee has dropped from 54 to 60 in 2 months. Yes, the Bernanke statement was trigger. But there is little denying that the oversold India growth story has not been backed by results and investors are pulling out big time. There is also a liquidity issue with Dollars shortage in market not unlike an year or so back. Can you explain how? F/X hedge funds never hold on to positions long enough to be responsible for long term movements in foreign currency. These are driven primarily by more fundamental factors. In fact, even equity hedge funds rarely hold on to positions for long periods except for a few blue chip stocks. Hedge funds can at best drive short term trends in the currency market where they might dump a large volume of Rupees causing it to go down, but if the dumping is contrary to fundamentals there will be equally eager buyers over the next few days.
ravishingravi Posted June 27, 2013 Posted June 27, 2013 Can you explain how? F/X hedge funds never hold on to positions long enough to be responsible for long term movements in foreign currency. These are driven primarily by more fundamental factors. In fact' date=' even equity hedge funds rarely hold on to positions for long periods except for a few blue chip stocks. Hedge funds can at best drive short term trends in the currency market where they might dump a large volume of Rupees causing it to go down, but if the dumping is contrary to fundamentals there will be equally eager buyers over the next few days.[/quote'] To a large extent I agree with your view. But I think even in their speculation, one can identify a certain view, a certain trend. Here my reference was particular related to hedge fund involvement in debt market, not so much equity which hasn't quite taken a hit on the same scale. Yes, even in 10 years bonds, they wouldn't hold too long but over a 6 month - year period you can assess what their overall view I think Rupee never really held up if you look at two year trend. It has been collapsing for last two years from 46 in Jul 2011 to now 60. While some factors have changed and some have remained the same, the overall sluggish economy combined with India's domestic fundamentals which have really failed to deliver and lack of reforms have really hurt foreign investment.
Sachin=GOD Posted June 27, 2013 Posted June 27, 2013 Ruppe isn't going back to 50 (or somewhere around that) till at least 2-3 months before the elections.
dial_100 Posted June 28, 2013 Posted June 28, 2013 CAD will add quite a lot of short term debts very soon if this continues. The most important concern would be how it is funded as it will directly impact the interest rates as low cost funding will not be available for long time. The picture doesn't look good right now. Wonder what MMS is doing ??? I dont see any concrete plan yet. Update: I know there is not whole lot that can be done immediately but this NDTV program gave good reasons for what has transpired the depreciation of currency. Why Re devalued NDTV
bulbul Posted June 28, 2013 Posted June 28, 2013 ^ MMS is ready with slew of 'reforms' and waiting for green signal from Madam. General election is near by anyway.
rkt.india Posted June 28, 2013 Posted June 28, 2013 Must be good for the NRI's and IT outsourcing providers and exporters.
FischerTal Posted June 28, 2013 Posted June 28, 2013 i think PM thought of this song while making policy decisions regarding the rupee [ame=http://www.youtube.com/watch?v=ETGv2gPgLys]Low-Flo Rida Lyrics - YouTube[/ame]
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