I am no expert on this but believe do have some sense about economy...Here are my thoughts...
Can you please throw some more light on this??...I know dollar has appreciated but as said above not in real terms....As far as unemployment numbers are concerned then they are indicators but do not give the correct picture..Last year US has seen record number of L1 and H1 rejections...Bills are being introduced to discourage companies from outsourcing...All this do have some role to play ... B/w don't you think i will loose dollars if i take my investment out in the local currencies?? Moreover high interest rates in India kind of make it more appealing for me to keep my money here unless and until i know i will earn more then 10% back home(read US)?? FII's are decreasing in India due to other factors, no??
Since you are a professional in this field i will not question it much. However as far as weakening gold is concerned then i believe global slowdown is the factor complemented with eurozone crisis. People are finding it hard to find out buyers for gold and thus makes it less charming as an investment as compared to $US.
Which make sense but does not tell us why dollar is stronger...
I don't agree with this. RBI did not intervene much as far as rupee depreciation was due to the fact
- It was a PPP adjustment that was bound to happen due to high inflation in India
- RBI with reserves of around $300 billion do not have enough firepower to intervene especially in this era when there is eurozone crisis and global slowdown...
Having said that can you please share something which suggests that RBI is racking up the dollar thereby further supporting dollar rally??
As far as US Economy is concerned, it doesn't take guidance from any single reason. Here in this case, u are seeing Jobless data only. which is one of the reason among many reasons. Just take the case of Australian Dollar, It is not much being used in International trade, but due to strong economy, it remained strong from past few quarters. The US economy is also doing well, coz not affecting by Euro crisis. THE US is almost untouched from wht is happening there.
---- Yes, you are right tht if FIIs are going out at this time then there are making double losses. Coz they probably entered in India when Ruppee was at 46 - 48 Range and now it is at 52 - 54. mind well indian Dollar index has taken severe beating compare wht we see on day to day basis. today Nifty is at 4700 levels in ruppees terms but our dollar index for nifty is hovering around at 4000 levels. Pathetic to say the list.
From FIIs point of view it is good to get rid off indian exposure now. Reason is Ruppee is well possed for 56 - 58 Range, coming elections in India and our Current account deficit.
--- Higher Interest rates in India is good only for those who wants to go for FIXED deposit in BANKS. But wht abt business, there cost of burrowing goes up like anything and there are the real business drivers not bank deposits. Indian corporates are feeling this pressure from Domestic as well as international side.
Domestic side - RBI was increasing rates from past few quarters
International side - Strong Dollar made FCCB Bond redemption hard and expensive for them.
--- You are not right for GOLD. GOLD is excellent hedge against inflation. whenever there is huge inflation issues, central banks buy gold. Always follow thumb rule, when in uncertainity regarding global turmoil, buy GOLD. When big institution buy or sell some assets they hardly care about price. World bank was net seller of GOLD when it was at 15-16000 in india where as RBI and china are net buyers. Currently, JApan is biggest exporter of GOLD. it is coming from Japanese household not from their Govt.
--- Currently, RBI is prepering for Rs 58 = 1 dollar. It will not intervene in future too. Indian Banking System now moving to Basel norms and for tht almost all of them require capital infusion. and thts why recently GOVT. allowed foreign individuals to invest in Indian stock market. thts short term not even worth to call solution. on 16 Dec 2011, there was an intervention from RBI duing to restriction it imposed on local dealers.
Although I don't have any link to support this and tht they are buying dollars but then 1 needs to take into account from last 1 year of their some of actions.