Economic crisis in India 2013 | ALL Updates & News

[beijingwalker]

India rupee plunges to fresh record low against dollar

Indian rupee hits lifetime low of 61.51 rupees to the US dollar

Tuesday, 06 August, 2013, 3:20pm

India’s rupee plunged to a fresh record low against the dollar on Tuesday over concerns that foreign capital could flow back to the United States as the American economy picks up.

The rupee, Asia’s worst-performing major currency this year, hit a lifetime low of 61.51 rupees to the dollar in morning trade, below its previous low of 61.21 rupees on July 8.

The rupee has plunged 12.3 per cent this year, including Tuesday’s fall.

Indian shares fell 1.03 per cent to 18,983.76 points after the currency hit a new low.

“The rupee is on a runaway train and no one knows where it will stop,” said Naveen Mathur, associate director (commodities and currencies) with Angel Broking.

“This is not looking good for the country,” Mathur said.

Dealers said India’s central bank -- which is believed to have intervened several times in the past few months to help prop up the rupee -- was absent from the market Tuesday, as the rupee plunged.

Demand for the dollar has increased amid speculation of a sooner-than-expected scaling back of US stimulus as the world’s largest economy recovers, analysts said.

Slackening domestic growth, weak exports, rising foreign fund outflows and India’s high current account deficit have battered the rupee.

The depreciating rupee stokes inflation by raising the cost of everything India imports from crude oil to chemicals and pulses.

Growth is at a decade low of five per cent and the current account deficit -- the broadest measure of trade -- for the full fiscal year ended March is at a record high, mainly from huge oil and gold imports and weak exports.

The rupee depreciation is the latest blow for the scandal-tainted coalition of Premier Manmohan Singh, which is keen to see the economy pick up before elections due next year.

On Monday, data showed that India’s services sector, which contributes 60 per cent of national output, shrank for the first time in nearly two years in July, fuelling pessimism about an early economic recovery.

Market sentiment is also weak in the absence of fresh positive news from India’s government.

India’s rupee woes have heightened speculation the nation could be headed for a crisis of the sort it suffered in 1991, which forced a bailout by the International Monetary Fund.

In an interview published last week, veteran economist Arvind Panagariya warned India’s foreign exchange reserves were too low.

The Reserve Bank of India has kept interest rates on hold, prioritising rupee stability over economic growth, and has given no timeline for rolling back its recent liquidity-tightening measures to prop up the currency.

Last month the RBI announced a range of measures to bolster the rupee, including raising short-term interest rates and lowering the amount a bank can borrow or lend under its daily liquidity limit.

 

[Parul]

 

[cyphercide]

The Indian rupee made a dramatic recovery after the government announced the appointment of Raghuram Rajan, the chief economic adviser in the finance ministry, as the next governor of the Reserve Bank of India.

The partially convertible rupee not only erased all losses, but ended higher at 60.77 per dollar as against Monday's close of 60.88. The rupee traded at 61.45 before the announcement of Mr Rajan's appointment.

Rupee makes dramatic recovery on Rajans appointment as RBI chief - NDTVProfit.com

 

[indiatester]

Last year, not only did my US stocks outperform Indian stocks, I gained > 20% simply because of rupee fall.

 

[BigDaddyWatch]

This is what i have been saying about India for sometime here. The hot money inflows that in the past has helped India to fund its persistent and growing current account deficits is now leaving the country. And the raft of measures introduced by the RBI and the Indian government in recent times looks more like panic rather then really tackling the countries problems. And the result is that capital is leaving India at a accelerated pace. India currently is burning through its forex reserves to defend its currency. India may soon face a crisis like that of ASEAN in the 1990's.

As Indian rupee hits record low, foreign investors baulk

The rupee fell to a record low on Friday as measures to curb foreign currency outflows were seen as the latest roll of the dice by policymakers struggling to defend the currency in a slowing economy and a toughening global investment environment.

Far from propping up the currency, the measures from the Reserve Bank of India late on Wednesday to restrict how much its citizens and companies can invest abroad raised fears of outright capital controls that would further undermine the confidence of foreign investors.

Indian policymakers have cobbled together a slew of steps over the past month in a bid to halt the rupee's slide, including the central bank's extraordinary steps on July 15 to drain cash from the system and raise short-term interest rates in an economy already growing at a decade low.

Yet none of the steps unveiled so far have convinced investors that India can attract overseas investments, which is seen as essential in narrowing a record high current account deficit that is the biggest source of the rupee weakness.

The approach is beginning to test the patience of foreign investors, just when emerging markets such as India are already seen as particularly vulnerable ahead of the expected tapering of monetary stimulus by the U.S. Federal Reserve.

"They're coming across as a bit panicky. That's what is damaging sentiment for investors," said Jonathan Schiessl, a fund manager at Ashburton Investments in Jersey, referring to the RBI's actions to defend the rupee.

"Unless things improve, we will probably in all likelihood be withdrawing some weightings from our India positions."

The partially convertible rupee fell to an all-time low of 62.03 to the dollar as trading began. By 0500 ET, it was trading at 61.88, weaker than its Wednesday's close of 61.43/44. Markets were closed on Thursday for a holiday.

SLIP SLIDING AWAY

The central bank's capital outflow restrictions came a day before the dollar spiked after U.S. jobless claims data on Thursday suggested an early end to the Fed's asset purchases.

That prospect looms over India at a time when it is suffering from a current account deficit that hit a record high of 4.8 percent of gross domestic product and an economy growing at a decade low of 5 percent.

Foreign investors have already sold a net $11.6 billion of Indian debt and equities since late May, sparking fears of continued weakness.

India's main NSE index .NSEI fell 4 percent at one point on Friday, while benchmark 10-year bond yields surged to their highest since May 2012 as prices headed for their worst week in four-and-a-half years.

UBS strategist Manik Narain said that as emerging central banks tightened policy to defend their currencies, stocks would be affected, something that is already happening in India.

"India is losing control over the currency and you are starting to see the weakness transmitting to stock markets. There could be a self-perpetuating cycle where currency weakness flushes out equity investors and that takes the rupee weaker still."

CAPITAL CONTROLS?

The RBI's new measures also included further capping the amount that companies can invest abroad.

But overseas investments from India had already been on the wane, averaging a monthly $400 million in the first half of the year from $710 million in 2012, according to DBS data.

The biggest fear is that the RBI's action could be the start of a far stronger move to restrain capital.

"The steps taken so far only target residents, but if this raises expectations that they could potentially resort to capital controls targeted at non-residents, that could have adverse near-term implications for capital flows," HSBC's Chief economist for India and ASEAN Leif Eskesen said.

"It will, therefore, be critical to tread very carefully when it comes to capital controls, to anchor expectations, and also not use it as a substitute for more appropriate and effective measures," Eskesen said in a note to clients.

RUPEE FALLS

As policy makers struggling to find a solution for the rupee's falls, investors expect more weakness ahead. Overseas investors betting via one-month offshore non-deliverable forwards quoted the rupee trading at 62.46, while onshore bets see the rupee at 62.35 within the month./B]

Meanwhile, a Reuters poll on Thursday showed short positions in the Indian rupee have hit the highest in two months.

At heart of India's failed defense of the rupee so far is that none of the measures unveiled so far have given markets assurance that the country can attract foreign flows in an increasingly difficult global environment.

India last month unveiled plans to further ease restrictions on foreign direct investment (FDI) but previous measures have had mixed results. FDI fell to $36.9 billion in the fiscal year ending in March from $46.6 billion the previous year.

This week it announced measures to attract near-term capital inflows, including by spurring state-run companies to sell debt abroad and raising funds from Indians abroad.

Yet doing so could prove hard without major confidence-inspiring reforms, especially as RBI measures last month to drain cash raise the prospect that borrowing costs will rise.

"We remain underweight on Indian credits as the current spreads do not offer enough compensation in our view," said Arthur Lau, head of fixed income for Asia ex-Japan for Pinebridge Investments in Hong Kong.

As Indian rupee hits record low, foreign investors baulk | Reuters

 

[cirr]

Indians are not interested in this type of negative report concerning India。

Indians are only fond of posting negative news about other countries，especially China。

 

[cirr]

Updated August 16, 2013, 3:22 a.m. ET

Yuan Hits Record Against U.S. Dollar

SHANGHAI—The Chinese yuan hit a record high against the U.S. dollar on Friday, amid growing expectations that China's economy has stabilized.

The yuan reached 6.1090, a gain of 0.06%, in early trade due to strong demand from corporations and broad weakness in the dollar, which fell against major currencies on Thursday. At 0605 GMT, it was trading at 6.1114.

The yuan, officially known as the renminbi, is on course for its fourth consecutive weekly gain and has risen 2% this year. The Shanghai Composite Index, meanwhile, is up nearly 10% this month.

Economists and traders say the Chinese currency is likely to strengthen further in coming months, partly due to expectations of higher interest rates in China.

"We are still looking at appreciation for the yuan but it won't be anything too big. Our year-end forecast is 6.10," said Suan Teck Kin, an economist at United Overseas Bank U11.SG -0.74% Group.

Dariusz Kowalczyk, senior economist at Credit Agricole CIB, noted that China's central bank has been guiding the currency higher via its daily fixing rate, the center of its permitted trading band, which he said is mostly a reflection of recent dollar weakness.

The People's Bank of China sets a daily parity rate versus the dollar, and allows the yuan to trade 1% higher or lower than that rate.

Nomura on Thursday recommended taking positions that bet on further gains by the yuan versus the dollar. The release of better-than-expected economic data for July, including on trade and manufacturing activity, has increased the prospects of capital inflows and pressure on the yuan to appreciate, it said in a note.

It also noted that a Group of 20 summit is scheduled for the first week of September, and the yuan has historically gained in advance of this event.

--Amy Li

http://online.wsj.com/article/SB10001424127887323639704579015863981454876.html

 

[jpsingh]

Its hard time for us.

 

[AADHAAR]

The USA pegs its currency (USD) to the chinese yuan.

USDINR, USDBRL, USDIDR, USDAUD, USDRUB ...all are free floating currencies.
All move in tandem.

But CNY is lucky ...because US pegs its currency to it.

You should thank Fed Reserve ... it keeps adjusting the value of the USD, so that its currency doesn't move against CNY.

 

[Chinese-Dragon]

The USA pegs its currency (USD) to the chinese yuan.

USDINR, USDBRL, USDIDR, USDAUD, USDRUB ...all are free floating currencies.
All move in tandem.

But CNY is lucky ...because US pegs its currency to it.

You should thank Fed Reserve ... it keeps adjusting the value of the USD, so that its currency doesn't move against CNY.

You have no idea what you are talking about.

If the two currencies are "pegged", and the "USD does not move against the CNY", then how is the Chinese Yuan currently at a record high against the dollar?

Use your brain. Or check any currency chart:

Yep, it sure looks like these two currencies are pegged, and there is no movement between them (as per your theory).

 

[Tshering22]

The USA pegs its currency (USD) to the chinese yuan.

USDINR, USDBRL, USDIDR, USDAUD, USDRUB ...all are free floating currencies.
All move in tandem.

But CNY is lucky ...because US pegs its currency to it.

You should thank Fed Reserve ... it keeps adjusting the value of the USD, so that its currency doesn't move against CNY.

Well free floating isn't really helping us, is it?

I mean while it doesn't bind us to a single currency, we seem to be nowhere these days, with respect to international expenditure.

For example, last year I could spend more dollars because I needed to pay less INR to get it. But this year I will get lesser dollars for that amount of money.

It isn't easy for travel related tasks when your country's currency is low, ya know.

Not much of an economist to understand stuff but can you tell me what is the benefit of free floating VS pegged currencies?

Thanks a lot MMS.

 

[AADHAAR]

You have no idea what you are talking about.

If the two currencies are "pegged", and the "USD does not move against the CNY", then how is the Chinese Yuan currently at a record high against the dollar?

So, you mean that Federal Reserve is gradually devaluing the USD..

Still better ... la....

 

[Tshering22]

Indians are not interested in this type of negative report concerning India。

Indians are only fond of posting negative news about other countries，especially China。

On the contrary, there are so many negative threads here about us BY our own countrymen.

Whereas it is you lot who through your 'Harmonious China' policy, hide all the negatives of your country and project it as if China is the most perfect regime.

Come on, don't deny that policy doesn't exist.

Your own officials claim it.

 

[Chinese-Dragon]

Updated August 16, 2013, 3:22 a.m. ET

Yuan Hits Record Against U.S. Dollar

SHANGHAI—The Chinese yuan hit a record high against the U.S. dollar on Friday, amid growing expectations that China's economy has stabilized.

Chinese Yuan Hits Record High - WSJ.com

Chinese Yuan is at a record high. Great news.

So, you mean that Federal Reserve is gradually devaluing the USD..

Still better ... la....

Read the article cirr posted above, from the Wall Street Journal.

The Chinese Yuan is at a record high against the USD. And at the same time, the Indian Rupee is at a record low against the USD.

Just use your brain and think about it. They can't devalue the dollar against only one currency, if they devalue it will devalue against all currencies.

 

[Indo-guy]

Indians are not interested in this type of negative report concerning India。

Indians are only fond of posting negative news about other countries，especially China。

Not true...I can say that atleast based on myself . I have greatest regards for China ! and I am open to constructive criticism and negative truth ...