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Indian expats cashing in on falling rupee
Indian expats cashing in on falling rupee Staff Reporter / 21 August 2013 Concerns mounted over the state of the Indian economy as the country’s currency plummeted to another record low against the dollar and shares continued their slide on Tuesday. The Indian rupee, Asia’s worst-performing currency this year slid to 64.13 rupees to the dollar in morning trading, past its previous low of 63.22 on Monday, and some Indian expats are cashing in on the record low the currency has hit by sending more money home. The Reserve Bank of India is believed to have intervened twice in the foreign exchange market to sell dollars for rupees. The move lifted the Indian unit slightly but it still ended the day at a new lifetime closing low of 63.25 rupees to the dollar. Troubles besetting the rupee, which has fallen nearly 17 per cent against the dollar this year, has spilt over to the stock and bond markets. Indian shares — which have lost seven per cent in the past three trading days — slid as much as 1.83 per cent in early trade to a low of 17,970.98 points before recovering to close down 0.34 per cent at 18,246.04. The yield on the 10-year benchmark bond hit 9.23 per cent intraday, the highest for over five years, reflecting eroding investor appetite for Indian debt as worries about the economy and potential default mounted, AFP reported. Finance Minister P. Chidambaram told parliament a number of government steps had been taken to stem the rupee’s decline including reducing imports of non-essential items such as gold. The falling rupee stokes inflation by raising the cost of everything India imports from crude oil to chemicals and pulses. There are also growing fears that India will find it tough to fund its gaping current account deficit, which hit a record high last year. India’s weak trading sentiment was mirrored across key Asian stock markets, with investors jittery before Wednesday’s publication of the minutes of July’s US Federal Open Market Committee meeting. These were expected to give indications about a possible rollback of the Fed’s massive stimulus programme. Most emerging market currencies have been hit by expectations the Fed will scale back its stimulus sooner than expected, causing funds to flow back to the United States as its economy recovers. “This is a crisis, the sentiment is extremely frail,” said Param Sarma, chief executive of NSP Forex, a forex consultancy, according to AFP news agency. In the UAE, many Indian expats view the record decline of their currency as an opportunity to invest and send more cash home. However, Vasudev, assistant manager of UAE Exchange, Bur Dubai branch, said it’s been business as usual. “Even though we opened at Rs17.3 to the dirham on Tuesday morning, fluctuations in the rupee don’t influence people. The people who have to remit do so on a monthly basis — end of the month and first week of the month, around the time salaries get credited.” At a branch of Al Fardan Exchange located in a mall, the manager (not authorised to speak to the media), said he had noticed a disturbing trend in the past few weeks of Indians taking personal loans from banks and sending the money home. The manager’s own belief is: “Send what you have, never take a liability, it’s best to take it slow and send monthly.” “Yesterday, a man sent five million in Indian currency home to three different accounts.” There is a huge risk, though, in taking loans and sending that money home. According to K. V. Shamsudheen, who runs a charitable trust and looks into the welfare of NRIs and also conducts classes in Dubai on financial awareness: “More than 36 per cent Indians are taking loans from credit card companies that say they are charging 2-3 per cent interest” when, in fact, that 2-3 per cent was not annual interest, but monthly. Shamsudheen advises expats on key matters: “Never take loans from individual money lenders. Never take loans from credit card companies. And if you are remitting money home, make sure the investment back home is not in real estate, not in buying houses, but in a liquid investment such as fixed deposit, mutual funds and stocks.” news@khaleejtimes.com Continue reading
Imran’s loss is Shahid’s gain, Akshay’s multi crore property deal in Dubai & more
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Rupee hits new low again
Rupee hits new low again Issac John / 20 August 2013 The battered Indian rupee plunged to a record low of 63.30 to the dollar on Monday amid indications that its seemingly inexorable fall will continue for some more time as attempts by the Reserve Bank of India, or RBI, to shore up its value appeared ineffective. Silver plates in the form of Indian rupee notes at a showroom in New Delhi. Some analysts predict that the currency may even hit 70 against the dollar in a matter of weeks. — Reuters The partially-convertible rupee tumbled 2.3 per cent on Monday, its biggest single-day fall since September 22, 2011, leaving non-resident Indians in the Gulf in a quandary — whether to transfer their money now or wait for further exchange rate gains. Most money exchange houses in the UAE reported only normal remittance business as uncertainty persisted about a further decline in rupee value with some analysts even predicting that the relentless decline could even hit 70 against the dollar in weeks. While efforts to prop up the rupee, which has tumbled more than 12 per cent against the dollar this year, have thus far proved ineffective, bond yields surged to five-year highs threatening to drive the Asia’s third-largest economy towards a full-blown crisis. Currency analysts believe the rupee could overshoot to 64 to 65 to the dollar in the next few months and then could come back provided the recent measures by the RBI — including tightening of rules on how much citizens and companies can invest abroad, and curbing gold imports — prove effective while other key initiatives such as the opening up of foreign direct investments and trimming of fiscal and current account deficits succeed. Currency dealers said persistent dollar demand by banks and oil refiners contributed to the rupee’s latest fall. They expect further dollar selling by the RBI as well as other measures to support the currency. World Bank chief economist Kaushik Basu, describing the country’s problems were “overplayed,” said India was not in danger of a full-blown economic crisis. India is nowhere near the 1991 crisis when India had to seek a bailout from the International Monetary Fund in what was considered a national humiliation, he said. “The gloom is being overplayed.” Analysts believe that apart from deteriorating economic troubles at home, an exodus of foreign investors on concerns over a possible scale back in quantitative easing by the US had aggravated the currency’s woes. The government is struggling to reduce its current account deficit, which currently stands at 4.8 percent of gross domestic product, or GDP, while attempts to push through structural reforms by relaxing restrictions on foreign direct investment have seen little progress. Net outflows from Indian bonds and stocks total $11.4 billion since late May. Still, India has reserves to cover about seven months of imports, compared with just three weeks in 1991. India’s bond market has borne the brunt of the outflows, with foreigners taking out around $10 billion since May 22. The benchmark 10-year bond yield surged 35 basis points on the day, to 9.23 per cent. Equity markets have remained relatively insulated with outflows from the cash market at less than $100 million on Friday, when the main stock benchmark fell about four per cent, the most in nearly two years. Heightened selling in equities could exacerbate the rupee’s fall, dealers said. Meanwhile, Mumbai’s main stock index fell 1.6 per cent on Monday. The yield on India’s 10-year benchmark government bond climbed as high as 9.26 per cent, its highest since August 1, 2008, before the Lehman Brothers collapse. Many economists believe the RBI’s liquidity tightening will stay in place longer than initially expected, and many have cut their economic growth forecasts for the current fiscal year. However, amid this worsening scenario, there are many optimists who still believe in the Indian growth story. They expect the economy to pick up pace in the coming years as it is on track to cut deficit to around three per cent of GDP by 2016. The country is also on target to register a growth of six per cent in 2013-14 and in the next year it will go up to seven per cent. India, which is among the three large economies that are able to record above five per cent growth amid a gloomy global scenario, is also all set to emerge as the fifth world economic power by 2020-25. — issacjohn@khaleejtimes.com Continue reading
