Indian Rupee shows huge volume increases in Dubai, is New York coming?

The volume of Indian rupee futures in the Dubai Gold and Commodities Exchange (DGCX) surged 68 per cent in September.

The value of the total number of contracts traded on DGCX since inception now stands at $40.53 billion of which gold contracts account for a value of $20.87 billion.

Trading activity in September was similar to the previous month as wary traders preferred to tread cautiously in the commodity markets following increased price volatility that drove gold, crude oil prices and a few currencies to their highest levels in several decades, a statement from the exchange on Friday said.

The exchange began trading the world's first Indian rupee contracts in June.

Gold futures prices recorded a massive jump of nearly 10 per cent, climbing to their highest levels in almost 28 years, while Euro jumped by 4.45 per cent to reach an all-time high against the US dollar.

The prices of silver futures registered a big jump of 13.61 per cent during the month. A total of 68,558 contracts valued at $3.41 billion were traded in September.

Of the total traded volume (68,558 contracts) during September, gold futures remained in the forefront, contributing 42,323 contracts.

The British pound contract led the table in the forex segment, accounting for a volume of 21,783 contracts out of a total of 25,692 contracts traded.

Euro futures traded on the Exchange saw a rise of nearly 7 per cent over the previous month while the traded volume in the Indian Rupee futures leapt by 68 per cent.

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 Indian Finance Minister P Chidambaram is a worried man these days. He says that he is concerned over the unprecedented foreign investment flows into the rapidly growing economy have pushed the rupee higher into an "uncomfortable" zone. According to him, the country may have problems in handling such rush of funds.

The Finance Minister pointed out that the inflow of funds has led to the rupee’s rise – the rupee has risen more than 12.5 per cent this year. “The rise of the rupee is not in our comfort zone,” Chidambaram said, adding, “We have announced relief for our exporters and are regularly monitoring the situation. Now we must find ways and means to manage competitive exchange rate without hurting investments.”

At a meeting with media-persons in New Delhi, Chidambaram said that the steep rise in Sensex often surprised him, and sometimes worried him. He was aghast that the fundamentals were changing so rapidly day-to-day and confessed that the government’s assessment says that the Sensex is driven by copious flow of funds from a number of sources abroad.

The Finance Minister was also amazed that the Sensex attained 16th record high in just 17 sessions on Friday morning. Nevertheless, it closed down 2.1% down at 18,419.04 later.

It may be noted here that the stock market had lost heavily in August on apprehensions regarding the US credit crisis. The Sensex was dealing at the 14,000 level in July, earned more than 4,500 points in the September and recovered over 20 per cent since September 18, as FIIs invested more than $6.2 billion after the US Federation slashed interest rates.

The benchmark Bombay Stock Exchange Sensitive Index, or the Sensex, had gained nearly 34 percent this year, led by record net overseas fund inflows of 16.54 billion dollars by the time the stocks closed on Friday. According to some finance experts, the rupee could be at 38 to the dollar by mid-next year or even lower. Already the rupee has gone up by over 11 percent this year against the dollar; making it Asia's best performing currency.
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While Chidambaram confirmed that the rupee’s growth to its 9-1/2 year records versus the US dollar had taken it out of the government’s fundamental quantity, he remarked that the government agencies would once again gain control over the abundant quantities of capital falling into the financial system.