The Rupee pushes in to new territory vs the US Dollar

The rupee on Tuesday ended at a fresh nine-year high of 40.3725/3825 against the U.S. currency on sustained capital inflows into the country and in the absence of any dollar demand. The local currency had touched the 40.53-level on May 20 and the 39.85-mark on May 13, 1998.

In quiet trade at the inter-bank foreign exchange market, the rupee moved in a small range of 40.37 and 40.43 after resuming strong at 40.39/40 a dollar against Monday’s close of 40.42/43 a dollar. It continued to draw support from consistent and heavy foreign investment flow, which in turn, attracted traders to build positions in the local currency.
The rupee on Tuesday ended at a fresh nine-year high of 40.3725/3825 against the US currency on sustained capital inflows into the country and in the absence of any dollar demand.

The local currency had touched 40.53 level on May 20 and 39.85 mark on May 13, 1998.

In quiet trade at the Interbank Foreign Exchange (forex) market, the Indian unit moved in a small range of 40.37 and 40.43 after resuming strong at 40.39/40 per dollar from Monday's close of 40.42/43 a dollar.

The rupee continued to draw support from consistent and heavy foreign investment flow, which in turn, attracted traders to build positions in the local currency, forex dealers said.

Traders anticipated some dollar demand from public sector banks at the behest of the central bank but dollar buying was not forthcoming despite global oil prices hovering around USD 72 per barrel, they added.

The Reserve Bank of India (RBI), which seemed interested in holding the rupee at 40.50 level for the past one month, failed to get the opportunity to intervene in exchange market in view of a substantial portfolio inflows in the last six to seven days, a leading dealer with a foreign bank said.

FII inflows into equity markets has driven the rupee by about 9.5 per cent so far in the calendar year. The RBI, however, fixed the reference rate for the US currency at Rs 40.41 per dollar and for the single European unit at Rs 54.98 per euro.

In cross-currency trades, the rupee was marginally up against the British sterling but eased against the Euro and the Japanese Yen.

The Indian unit ended slightly higher against sterling at Rs 81.42/44 per pound from Monday's close of Rs 81.44/46 per pound but moved down further against the European currency to end at Rs 55.11/13 per euro against previous close of Rs 55.08/10 per euro.

The rupee also eased against the Japanese unit to end at Rs 32.78/80 per 100 Yen from overnight close of Rs 32.76/78 per 100 yen.
Thailand's export value in baht terms will be 12.49 per cent lower in the second half of the year than the first due to the continued appreciation of the currency, the University of the Thai Chamber of Commerce (UTCC) said yesterday.
Indian Rupee vs. US Dollar / Gold Forex currency and money exchange
The estimate is based on an exchange rate of Bt34.48 to the US dollar and an assumption that the currency will lose some value during the rest of the year.

The government had projected export growth at 12.5 per cent for the year, to US$145 billion (Bt4.9 trillion), based on an exchange rate of Bt35.50-Bt36 to the dollar.

The university said the Kingdom would achieve its growth target of 12.5 per cent in dollar terms but that it would post lower income in baht terms.

UTCC also expects a decline in the growth rate of export revenue in the third quarter, particularly in the European, Asean, Australian and Chinese markets, due to the stronger baht.

Aat Pisanwanich, director of the university's Centre for International Trade Studies, said exporters had faced a currency loss of 8.19 per cent in the first half of the year and another 12.49 per cent is expected in the second half, compared with the first six months. He said small and medium-sized enterprises (SMEs) would suffer the most from the stronger baht, because of a lack of credit flexibility.

The university also forecast that the baht would continue its appreciation in the third quarter and record a new peak of 32.50/33.50 to the dollar. It predicted the average value would stand at 34.48 to the dollar this year.

However, the current-account surplus will remain, which will further push the currency to Bt34.01 in the third quarter - up 9.65 per cent from the same period last year.

Based on a survey of 150 respondents, 53 per cent said their business was facing difficulty because they are SMEs.

Major sectors suffering from the stronger baht include garments, jewellery and furniture.

In the first five months, furniture-export value fell 17.63 per cent, garments 10.09 per cent and jewellery 8.25 per cent.

The university forecast that exports would increase 9.1 per cent in the third quarter and 3.37 per cent in the fourth.

To tide over the drop in the baht value of exports, Aat said exporters would have to quote higher prices to compensate for the losses in the remaining months of the year.

"An increase in selling prices will slow export growth in the second half, compared to the first half of about 18 per cent," he said.

To ensure export competitiveness, the university called on the government to encourage exporters to invest in neighbouring countries, while creating short-term measures to stabilise the value of the baht.

The baht is among the three Asian currencies that have appreciated the most, after the Indian rupee and the Philippine peso.

In addition, the university found that by the year-end, the current-account surplus should more than double to reach $7.72 billion, from $3.24 billion last year. The trade surplus will reach $7.36 billion, with exports of $145 billion and imports of $138 billion, it said.

However, it forecast that the country would miss its target for the number of tourists this year, with arrivals likely to reach only 13.9 million against the target of 14.8 million, due to political concerns earlier in the year.