Yet another 9 year high for the Rupee, watching the Sensex closely

The dollar hit a 2-month low against the yen on Tuesday as risk aversion rose on concerns that problems in the US subprime mortgage market will spread further into other segments of the credit market and reduce economic activity. Sterling hit a 26-year high overnight versus the dollar before gains were trimmed after UK factory orders unexpectedly fell in July. The dollar-block currencies were all strong. New Zealand’s dollar rose above $0.81 for the first time since it started trading freely in 1985 and Australia’s currency gained to a new 18-year high on speculation the nations’ central banks will raise interest rates. The USD/JPY tumbled after support at 121 was broken triggering stop-loss orders. We are selling the pair.


Since hitting 1.38 on July 13, the EUR/USD has been trading in a narrow trading range currently testing resistance at 1.3850. The pair is in a solid uptrend and would have to fall below 1.37 before any change in trend may occur. Yield and growth differentials support the EUR/USD while lower equity prices pressure the USD/JPY

Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.

US & Canada

Countrywide Financial Corp., the biggest US mortgage lender, reported its third straight decline (33%) in quarterly profit on increases in late loan payments and reduced its forecast for earnings this year.


Canadian retail sales in May rose at the fastest pace in almost a decade, adding to pressure on the Bank of Canada to keep raising interest rates. Retail sales surged 2.8% m/m C$35 billion ($33.7 billion), Statistics Canada reported.
Europe
Euro / Rupee and Yen / Rupee.
UK factory orders dropped to -6 in July, down from 8 in June. Export orders fell to -8 from zero in June. The gauge of average prices in the next three months fell to 11 in July, from 16 in June, the Confederation of British Industry said.


Royal Bank of Scotland Group Plc said its overall PMI index for the eurozone fell slightly more than expected to 57.3 in July from 57.8 in June. The manufacturing index fell to 54.8 in July from 55.6 in June while its services index declined to 58.1 from 58.3. New manufacturing orders fell to their lowest since November 2005, while in the services sector orders reached the highest level since June 2006. The report still indicates healthy growth in the EMU, but the decline in manufacturing orders indicates the higher euro is reducing manufacturing demand.


The euro’s appreciation has been “very gradual” so far and “the euro region’s exporters haven’t suffered,” ECB Executive Board member Jürgen Stark said in an interview with the Frankfurter Allgemeine Zeitung. “It would be problematic if we started seeing abrupt changes” in the exchange rate, Stark said.
Asia-Pacific Euro / Rupee and Yen / Rupee.

The yuan traded near the highest since the end of a dollar peg in July 2005 on speculation China will pursue faster currency gains as part of measures to curb economic growth and inflation.
The Indian rupee showing consistent gains against the Qatari riyal (QR) coupled with the rising cost of living here portend increasing financial trouble for middle and low-income expatriate Indians.

The appreciating rupee and higher inflation are eroding the savings potential for Indians. The rupee surged further against the dollar yesterday with the riyal quoting at less than Rs11 (Rs10.97) in the local foreign exchange market.

Currency traders said that since the Reserve Bank of India (RBI), India's central bank, had adopted a hands-off approach, the rupee's upswing against the greenback was unlikely to cease. And this would mean that the rupee could maintain its surge against the riyal since the latter is pegged to an ever-weakening US currency.

This may disappoint those Indian expatriates who are said to be saving locally in the hope that the rupee would begin sliding against the greenback sooner rather than later, promising greater value for their riyal.

The only other category of Indians-aside from the expatriates-who is suffering due to the appreciating rupee are exporters whose foreign exchange earnings are dwindling.

With the Indian economy and the stock markets booming, the country is flush with funds being pumped in by foreign institutional investors (FIIs), particularly the hedge funds.

So, higher liquidity and strong fundamentals are, naturally, pepping up the currency. "FIIs seem to have enormous confidence in the India market," said Brahma Rao, General Manager of Trust Exchange, which is managed by India's largest public sector bank, the State Bank of India (SBI).

RUPEES FOR REAL ESTATE INVESTMENT - CAT ISLAND PROPERTIES - BAHAMAS

Overseas Indians may be hit further as both non-resident and rupee deposit rates at home are also showing a downward trend. Yearly deposit margins are down from 9.5 per cent to 8.5 per cent.

And since the rate of inflation is currently 4.57 per cent, expatriate Indians would be forced to route their savings into risky avenues at home like mutual funds, an investment analyst said.
Indian rupee rises to nine-year high

The Indian rupee rose to a nine-year high on Tuesday as dealers adjusted positions in anticipation of strong foreign investment flows, but suspected central bank intervention drove it off its peak, dealers said.

The partially convertible rupee was at 40.27/28 per dollar, off an early high of 40.20, its strongest since May 1998. The rupee ended at 40.2950/3050 on Monday. “It’s the usual story: the market tries to push the limit, and the central bank steps in to block the rupee, but the trend has been for the rupee to rise gradually,” said a senior dealer with a corporate. At its peak the rupee had gained more than 10 percent against the dollar this year, to be Asia’s best performing currency in 2007. Capital inflows have been strong, with a large proportion going into the stock market that climbed on Tuesday to its 14th record in 17 sessions.

Foreigners have bought more than $9.8 billion of stocks so far in 2007, higher than about $8 billion in all of 2006 and edging closer to a record inflow of $10.7 billion in 2005. The rupee also gained support as the dollar was trading near a two-month trough against the yen and near a record low against the euro as worries about the US subprime mortgage market hurting the economy weighed.

Still, traders remained cautious about building large positions in the local unit as the central bank is widely suspected of intervening against the rupee recently.

The central bank bought $23.4 billion in intervention between January and May, data shows, and traders say it has bought dollars through June and July to limit the pace of the rupee’s rise