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Charts & Analysis

Dollar Now at 61.7, Euro at 80.95; Looking Ominous

The dollar is at Rs. 61.1 61.7 and things look bleak again. Despite the cut in liquidity by the RBI, the dollar is hitting a new high against the rupee – and this is not a “failure” of the RBI measures, it is that such measures necessarily take a lot of time to act.

Updated: The dollar has gone to 61.7 now.

Rupee Dollar Short Term Chart

(Note: the last data point – for August 6 – is based on the current spot price reported at CCIL. The rest are RBI reference rates)

The Euro has been spiking even earlier  (Data till yesterday only, RBI)

Rupee Euro Long Term Chart

Source: RBI

Where does this go from here? The dollar should rise further in the near term.

Foreign fund flows stabilize the rupee, which, ordinarily, should depreciate a massive amount every year due to our import-export gap. Unless we fix that gap, we have to depend on foreign flows. For that, there will be a point where our exports are competitive, and even building that export capacity can take months or years.

The impact of a rising rupee is hugely on industry and jobs. Expect a recession before the rupee shows serious strength. And a recession in the real estate “cannot-go-down” industry as well.

  • charles says:

    …our trade gap is almost 200 billion and its almost entirely plugged by invisibles frm it exports a nd remittances of overseas it workers. If our it industry cracks for some reason…the rupee will goto 100. It.maybe 7 % of gdp but it funds almost 40to50% of forex inflows in india.

  • Lalit Nambiar says:

    http://quantspartner.com/Dollar_vs_INR.aspx
    Indian Equity Market and INR/USD, not in Sync with each other
    A typical relationship was established between Sensex and INR/USD since FY06, accordingly :
    When Sensex use to be around 19,000, corresponding INR/USD rate use to be around 42-45. So, we should see the possibility of INR appreciating to that level in order to justify the current Sensex which is around 19000 ???
    However, even the most Optimist person would think again about such appreciation, but such possibility cannot be ruled out completely.
    And, If that relationship is not completely broken, then theoretically, Sensex should be at a level around 10,000.
    It sounds, most Pessimistic, but that is what the chart tells us.
    Both the above scenario, emerge out as conclusions when one analyses the below chart.
    Other Observations:
    In 2008, when market fell by 60%, during the same time INR/USD depreciated by 32%.
    Thereafter, till Nov-10, market gained by 150+% at the same time rupee appreciated by 14+%.
    Since Nov-10, the INR/USD has depreciated by 37% however market has fallen by just 11%.
    If one just concentrates on the graph, and believes “other things being constant”, he may conclude that index should be at a level much below the level reached in March-09.
    Background:
    Over the past few months, stock market participants are very nervous due to strong depreciation in INR/USD. As the rupee depreciates, worries over costly imports, Current Account Deficit (CAD), questions about the future economic growth arises. Some have opinion that India will no longer remain to be one of fastest growing economies of the world, and people everywhere opine that India will return back to “Hindu rate of growth”, implying a low growth economy.
    All the nervousness gets reflected with the sharp fall in benchmark indices. But our market bounces back each time after a sharp fall to present a view that all these are not real worries, and thus the volatility persists.
    Our 4QFY13 Result analysis, titled “Problem at Bottom of Pyramid” shows that currently Indian economy is actually in a dire state.

  • Lalit Nambiar says:

    http://quantspartner.com/RupeeDepreciation.aspx
    Rupee Depreciation, Companies Most Impacted
    We have created 5 list of Companies to understand which are the companies, and how will they get impacted on account of rupee depreciation. These lists can be used as ready reckoner. In case of most of the companies, financial data relates to FY12, being the most recent year for which audited annual accounts are available.
    The Lists are as follows:
    List of Companies which are ‘Huge Importers’.
    List of Companies which has ‘Significant foreign debt interest expense’.
    List of Companies which has ‘Significant FX Capital outflow as % of Net Assets’.
    List of Companies which are ‘Foreign Exchange Earner’.
    List of Companies which are ‘FX Earner but also has outflow on account of Interest or Capex’.
    Background:
    Recently, Rupee against USD has depreciated significantly. This will impact importers badly, their import cost will rise and if they are not able to pass on the rising cost it will squeeze their margins making them unviable to survive for longer.
    To some extent they will be able to pass on the rising cost to other producers and consumers. However, this will further fuel the inflation in the economy.
    In the recent past, cooling off inflation has proven to be the biggest challenge for the government, thereby deterring it to cut the interest rates, which in turn has lead to slowing down of the growth engine of the economy.
    On the positive side, depreciating rupee will benefit exporters and other foreign exchange earners.
    For a country like India which has high Current Account Deficit (CAD), depreciating rupee will have overall huge negative impact.

  • mangoman2012 says:

    Now RBI and Government should decide between Real Estate Brokers and Rupee. As simple as that.

  • Vivek says:

    A 50 basis point rate hike at this moment will be best bitter medicine for long term health of India.
    Also Goverment should announce amnesty scheme for black money stashed abroad right now.

  • mangoman2012 says:

    Raghuram Rajan effect caused some Rupee appreciation. closed at 60.77 let us see what will happen tomorrow.

  • Isitpossible says:

    FINALLY someone is talking about “recession”….
    WATCH coming years and the pain it will inflict upon middle class.
    With current government policies, lack of enthusiasm, political mess, corruption scandals and uncertainly of elections in 2014, expect rupee to float between 57-65 and after elections if global economic conditions become dire then it shall move towards 70-75 area causing high inflation (which is already seen but NOT acknowledged by government) followed by a severe recession….. NOT a good scenario to think about but sometimes we need to clean the house before we can decorate it again…

  • Krish says:

    Now the INR/USD correction seems beyond the RBI measures or even policy decisions of the govt.
    Only crash in crude oil price could rescue INR. Just pray for that and nothing else.

    • Isitpossible says:

      Actually Crude OIL is showing strength and a possibility of what it did in 2008 cannot be ruled out…. so expect crude oil prices to go high at least for few weeks/months especially if we see more unrest in middle east.

  • Guruprasad V says:

    I reiterate my stand something must be cooking in banking sector. Looks like this is just beginning. It looks like USD could simply appreciate to Rs.70.