As far as US Economy is concerned, it doesn't take guidance from any single reason.
Isn't this true for any economy???
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.
Are you saying that strong currency is an indicator of economy doing well??? I do not believe in this philosophy..I can be true but not always. Consider a simple example...All parameters remains the same and suddenly inflation in India increase by 10%...Obviously to maintain PPP US dollar will appreciate by 10% without any thing changed as far as economic activity is concerned. That is why i asked in my very first post...Is strong US dollar result of real growth or just high demand due to global meltdown and eurozone crisis???
---- 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 rupees 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 Rupee is well possed for 56 - 58 Range, coming elections in India and our Current account deficit.
I agree with you... It is good for FIIs to get rid of Indian exposure now because of multiple reasons..However ruppee plunging to 56-58 is not bad news for them if they have a long exposure..because things will fall back to its place once economy across will improve...anyhow my point is that it is not an indicator of strong US economy...There are multiple reasons for doing so...
--- 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.
Not denying the fact...However my point was that my prospects of growth should be higher then 10% atleast otherwise it doesnot make sense for me to reduce the exposure in India thereby taking a loss(due to higher conversion rate) and then taking a further loss in terms of opportunity cost..Also in no way i am trying to suggest that high interest rates are good for our economy...they are surely a bad sign...but then with high inflation you don't have much choice either...
Domestic side - RBI was increasing rates from past few quarters. International side - Strong Dollar made FCCB Bond redemption hard and expensive for them.
Absolutely right..Once again let me clarify that i am arguing only on one point..String dollar does not mean US economy is doing great...
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.
I agree with you in principal here...I am just explaining to you that why is gold prices comparatively going down...I am sure you will agree with me that whenver investors invest in some commodity they have liquidity on back of their mind. When there is global slowdown it is not easy to find investors for your high exposures to commodities like gold. It is no brainer to find out what is more liquid b/w gold and US dollar. In fact one of the suggestions for giving some strength to ruppee was to stop buying gold from international markets and start catering to that need internally...
Currently, RBI is preparing for Rs 58 = 1 dollar. It will not intervene in future too. Indian Banking System now moving to Basel norms and for that almost all of them require capital infusion. and thats why recently GOVT. allowed foreign individuals to invest in Indian stock market. thats short term not even worth to call solution. on 16 Dec 2011, there was an intervention from RBI during to restriction it imposed on local dealers.
Although I don't have any link to support this and that they are buying dollars but then 1 needs to take into account from last 1 year of their some of actions.
As said RBI did not intervene for couple of reasons..Let me repeat them here
a) PPP - Due to high inflation Rupee should plunge to certain number and it did..
b) RBI don't have weight to intervene and do something about it...All it will manage by intervening would be to exhaust all the reserves which would be disaster...
