India’s Rupee Drops Most in a Month on U.S. Stimulus Taper Bets

[faithfulguy]

India’s Rupee Drops Most in a Month on U.S. Stimulus Taper Bets - Bloomberg

rupee fell the most in a month on speculation the U.S. will pare stimulus that has boosted inflows to emerging markets.
More economists predict the Federal Reserve will taper its $85 billion of monthly bond purchases next week, and a report due today is forecast to show retail sales in the world’s biggest economy rose in November by the most since June. India’s trade deficit narrowed to $9.22 billion last month from $10.6 billion in October as exports rose 5.9 percent and imports fell 16.4 percent, official data showed yesterday.

“Expectations of sustained comfort on trade deficit figures going ahead bode well for the rupee and should likely provide downside support,” analysts at Religare Capital Markets Ltd., including Tirthankar Patnaik in Mumbai, wrote in a research report today. This comes “even as a potential U.S. taper remains a key overhang,” they wrote.

The rupee fell 0.7 percent to 61.67 per dollar as of 9:40 a.m. in Mumbai, the biggest drop since Nov. 12, according to prices from local banks compiled by Bloomberg. Religare predicts the currency will trade between 58 and 62 in the “medium-term.” One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 35 basis points, or 0.35 percentage point, to 11.74 percent.

The Federal Open Market Committee may begin reducing bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 survey. U.S. retail sales rose 0.6 percent in November, after climbing 0.4 percent in October, according to a separate Bloomberg survey.

RBI Review
The Reserve Bank of India is also scheduled to review policy on Dec. 18. The authority is aiming for firm control over inflation, Governor Raghuram Rajan said in the eastern Indian city of Kolkata yesterday.

Rajan has raised the benchmark repurchase rate to 7.75 percent from 7.25 percent in two moves since assuming office on Sept. 4 even as the RBI predicts the economy will grow at 5 percent in the 12 months through March 2014, matching last year’s pace which was the slowest since 2003.

Consumer prices rose 10 percent in November from a year earlier, according to the median of 33 estimates in a Bloomberg survey before data due after market hours today. That compares with 10.09 percent the previous month, which was the fastest pace since March. Industrial production probably shrank 1.2 percent in October, according separate Bloomberg survey, after a 2 percent expansion in September.

Three-month offshore non-deliverable rupee forwards fell 0.7 percent to 63.02 per dollar, according to data compiled by Bloomberg. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

It look like any US action would easily affect the value of rupee.

 

[MilSpec]

^^ time to light up the roman candles... Enjoy while it lasts

 

[faithfulguy]

^^ time to light up the roman candles... Enjoy while it lasts

the fact that Rupee is dropping is a good opportunity for traders. If you trade correctly.

 

[MilSpec]

the fact that Rupee is dropping is a good opportunity for traders. If you trade correctly.

true, but that is not why you posted this, is it?

 

[KRAIT]

Way much better than when we were at 67-68.

 

[Janmejay]

Rupee could appreciate to 59-61/USD by this fiscal end: India Ratings

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(The basis of this expectation…)
NEW DELHI: The rupee, which had slumped to its lifetime low of over 68 to a US dollar last month is expected to recover to 59-61 against the American currency by end of this fiscal, India Ratings & Research (Ind-Ra) said in a report.

The basis of Ind-Ra's expectation of rupee appreciation is based on economic developments in the last one to two months of this fiscal and the likely developments in the remaining months.

"Notwithstanding the likelihood of US Fed reversing the QE (quantitative easing) programme, Ind-Ra expects rupee to appreciate in the range of 8-11 per cent from its August-end 2013 level," Ind-Ra, a Fitch group company said in the report.

This would imply that rupee is likely to appreciate to 59-61 against the US dollar by end-March 2014, it added.

According to the report, the currency movements over January-May 2013 were more driven by fundamentals, while those over May-July 2013 were due to the outflow of portfolio investment triggered by the tapering off of US Fed bond purchase programme.

The report further said the sharp depreciation in the Indian currency was largely due to speculation, ballooning current account deficit, weakness in domestic economy and strengthening of the US dollar.

Meanwhile, the appreciation in the domestic currency would be largely driven by the recent policy measures taken by the RBI, resumption of capital inflows, passage of economic reform bills, lower current account deficit (CAD) in FY14 and pick-up of economic growth momentum from the third quarter of this fiscal.

"The expectation is based on recent policy measures taken by the RBI, resumption of capital inflows, passage of economic reform bills in the recently concluded Parliament session, lower current account deficit (CAD) in FY 2014 and pick-up of economic growth momentum from third quarter of current fiscal," it said.

While the rupee was the worst-performing currency in August 2013, it became one of the best performing ones in the emerging markets in the first fortnight of September 2013, showing a 4.2 per cent appreciation against US dollar between end-August 2013 and 13 September 2013, the report said.

At present, the rupee is hovering around the 62/US dollar level. The local currency had depreciated to an all-time low of 68.85 on August 28.

 

[faithfulguy]

true, but that is not why you posted this, is it?

Why not? Everyone can make more money by trading.

Way much better than when we were at 67-68.

that is a positive way of looking at the value of rupee.

 

[MilSpec]

Why not? Everyone can make more money by trading.

the real intent for most chinese trolls might be as small as 30.5 rs, but for your intent for posting all negative developments w.r.t. india results again the mystery surrounding the reasons for India obsession?

 

[faithfulguy]

the real intent for most chinese trolls might be as small as 30.5 rs, but for your intent for posting all negative developments w.r.t. india results again the mystery why the India obsession?

I just happened to come across this article. I generally don't post new threads. I prefer to respond.

 

[Raphael]

This market movement is kind of irrelevant. The rupee went into free-fall when Bernanke suggested that the federal reserve would taper QE, and then recovered to an extent (around the 60:1 level) when those rumors were quashed. But the fed will have taper at some point, and once that happens the rupee will collapse.

Indians should consider themselves lucky that Bernanke gave a false flag warning - it's a taste of what's to come, and gives them an exercise in preparing themselves.

 

[BigDaddyWatch]

The taper won't come as that will bankrupt the US government, the entitlement programs, Wall Street banks, the pension funds, home owners and bond holders and bond insurers all in one fell swoop as interest rates rises. The US economy is not improving despite the hype and propaganda by the media. The numbers of Americans not participating in the labor market is hitting record highs of nearly 92 million. The workforce today is no bigger than what it was in 2008 at the hight of the crisis. Most of the jobs that are today created are low wage part time jobs. And the people who still have a middle class job are facing stagnet if not falling wages while prices around them are on the rise ie they are facing stagflation. All that while debts in the country is increasing at a record pace and the debt is at record high.

Today in America you have the perverted situation that when economic news is good then stock prices fall and when economic news is bad stock prises rise. The reason is that money printing and artificial rock bottom low interest rate is what keeps the stock and bond markets going not the economy which is getting weaker by the day and the bubble in the economy is getting bigger by the day.

It seems that the Americans really believe that unrelenting money printing and deficit spending and foreign wars won't effect their long term economic health.

 

[JayAtl]

They could learn to manipulate currency as Faithful's mother china does.

 

[tranquilium]

It seems that the Americans really believe that unrelenting money printing and deficit spending and foreign wars won't effect their long term economic health.

I think it is more about "can't stop" money print rather than not knowing. Basically, the fundamental problem faced by US is that it is at a certain stage of its economic cycle where if it doesn't found new markets (usually by offing a major competitor), it is gonna to crash on itself.
During the last century, US got out the tight spot through the decline of European nations by WWII and decline of USSR by its dissolution. In theory, if US can somehow make China collapse, it will be able to get out of the tight spot again for a few decade, but using a de-centralized economy to fight an economic war against a socialist country has so far proven be like bringing a butter knife to a tank fight.
There are softer, but still sizable targets other than China of course, such as Japan, EU and India. Japan is especially juice and easy to pick. The problem is that US has already slaughter that animal once in the 90s and the calf is still to small to feed the hunger. EU is bigger than China, Japan or India of course, but while EU's ability to resist an economic fight isn't as high as China, the Europeans still got quite a bit fight in them. Finally, I would not be the least bit surprised if US is involved in the Rupee problem, though as an militarily independent country, India has better resistance to economic attacks than Japan.

 

[faithfulguy]

They could learn to manipulate currency as Faithful's mother china does.

Your country tried to manipulate the currency. But your rupee dropped like hot cake when the truth is out. Investor and Indians would rather hold dollar or other major currency rather than rupee, which is unsafe.

 

[Beidou2020]

The taper won't come as that will bankrupt the US government, the entitlement programs, Wall Street banks, the pension funds, home owners and bond holders and bond insurers all in one fell swoop as interest rates rises. The US economy is not improving despite the hype and propaganda by the media. The numbers of Americans not participating in the labor market is hitting record highs of nearly 92 million. The workforce today is no bigger than what it was in 2008 at the hight of the crisis. Most of the jobs that are today created are low wage part time jobs. And the people who still have a middle class job are facing stagnet if not falling wages while prices around them are on the rise ie they are facing stagflation. All that while debts in the country is increasing at a record pace and the debt is at record high.

Today in America you have the perverted situation that when economic news is good then stock prices fall and when economic news is bad stock prises rise. The reason is that money printing and artificial rock bottom low interest rate is what keeps the stock and bond markets going not the economy which is getting weaker by the day and the bubble in the economy is getting bigger by the day.

It seems that the Americans really believe that unrelenting money printing and deficit spending and foreign wars won't effect their long term economic health.

Excellent point.