Rupee morning update, continued exporter concerns from Indian

The Indian rupee was quoted slightly weaker in the absence of any dollar buying after a firm start at the Interbank Foreign Exchange (forex) market today.

The trade at the Interbank Foreign Exchange (forex) market was dull this morning even as the local currency resumed strong at 40.40/42 per dollar against overnight close of 40.45/46 per dollar.

It later fell back to 40.4650/4750 per dollar in late morning deals.

Forex dealers said the activity was at a low ebb with the exchange market largely influenced by equity markets in Asian countries.

Asian markets suffered a further setback in morning trade while the benchmark Sensex gained about 103 points in volatile trade after yesterday's stocks carnage.

Gold continued its recent slide.
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE). Euro / Rupee and Yen / Rupee.
The effect of the rising rupee is showing on India's exports which rose 14.4% during June this year after putting a stupendous show of over 20% rise for nearly three years.

The impact of appreciation of the Indian currency against the US dollar is more stark when you look at the export data in rupee-terms.

With exporters getting less than Rs 41 for every dollar worth of exports, instead of over Rs 46 last June, exports rose less than 1% to Rs 47,922 crore during June this year, compared to Rs 48,386 in June 2006. An appreciation of the rupee against the dollar has a more pronounced effect on India's exports than a rise against other currency since over 70% of the bills are invoiced in dollar-terms.

The rupee has appreciated over 11.5% between June 2006 and this year, while the currency gained 8.5% between January and July this year, prompting the government to announce a relief package for exporters last month.

The currency appreciation and a slower rise in June also pulled down first quarter growth to 18% with exports touching $34.3 billion. In rupee-terms, the increase was under 7% during April-June 2007 with exports during the period estimated at Rs 141,331 crore.

A more precious rupee also means a higher rise in the import bill and along with a low growth in exports, it results in a widening of the trade deficit which nearly doubled in the first quarter and rose over 100% in June when the impact was felt most.

India's imports rose 37% during June 2007 and were valued at $19.2 billion. During the month, oil imports rose nearly 10% to $5.7 billion, while non-oil imports were up over 52% at $13.5 billion.

During the first quarter, India's oil import bill increased 4.2% to $14.8 billion, and non-oil imports rose over 50% to $40 billion.

While economists said it was too early to comment on the adverse impact of a widening trade deficit since India had a large foreign exchange reserves.

A government study pointed out that textiles and information technology sectors would be the worst hit due to the appreciation of the rupee against the dollar while gems and jewellery and leather sectors would also face a loss in profitability and competitiveness. The big IT companies have already shown lower profit growth in Q1.