Indian rupee at record low again despite RBI intervention

A jeweller poses with silver plates in the form of Indian rupee notes inside a showroom in New Delhi August 19, 2013.

Credit: Reuters/Mansi Thapliyal

By Subhadip Sircar and Swati Bhat

MUMBAI | Wed Aug 21, 2013 8:34am EDT

MUMBAI (Reuters) - The Indian rupee plunged to a record low on Wednesday on heavy dollar demand from importers and as traders fretted over mixed signals from the central bank over its efforts to prop up the currency without choking off economic growth.

The rupee fell 2 percent to a record low of 64.5450 to the dollar despite what traders said was sporadic central bank intervention in both the spot and forward markets.

Measures by the Reserve Bank of India late on Tuesday to support longer-dated debt sent prices of beaten-down bonds sharply higher but also led traders to question the central bank's resolve in defending the currency.

Since mid-July, the RBI has taken steps to tighten cash conditions, which have failed to support the rupee but sent bond yields surging, posing a fresh threat to an economy that grew at a decade-low 5 percent in the last fiscal year.

"Currency market and participants may consider it as a reversal of RBI liquidity tightening measures to prevent currency volatility; thus some pressure on currency may re-emerge," said Anjali Verma, economist at PhillipCapital.

With a record high current account deficit at 4.8 percent of GDP, India is especially vulnerable to funds moving away from emerging markets in anticipation of a winding back of the U.S. Federal Reserve's stimulus program. Traders were looking ahead for clues from Fed minutes to be released later on Wednesday.

Deutsche Bank said in a note on Wednesday that the rupee could slide to 70 in a month or so, although some revival is expected by the end of the year.

The central bank's move to ease cash conditions after tightening them last month to support the rupee highlights the growing costs to the economy of stabilizing the currency.

"The bearishness seen across markets is largely a reflection of the fact that there is no quick fix solution to arrest the rupee fall," said Shakti Satapathy, fixed income strategist at AK Capital.

The partially convertible rupee closed at 64.11/12 per dollar, down 1.3 percent on the day, as importers led by oil refiners bought dollars. The 10-year bond yield closed down 49 basis points (bps) at 8.41 percent, its biggest single-day gain since mid-March 2009.

The yield on the benchmark 10-year bond earlier tumbled as much as 69 bps to 8.21 percent as its price rose.

The benchmark Sensex .BSESN closed down 1.9 percent as the falling rupee dented investor sentiment.

HIGHER BORROWING COSTS

Bond yields are up 86 bps since the RBI first started tightening market cash conditions in mid-July by raising short-term rates to keep rupee speculators at bay, pushing up the cost of credit for corporate borrowers.

Still, the rupee is down 6.7 percent since then.

The RBI said late on Tuesday it will buy 80 billion rupees ($1.26 billion) of bonds on Friday and will pare down its cash management bill sales as its target of pushing up the overnight rate to the central bank's emergency funding rate of 10.25 percent had been achieved.

The RBI relaxed rules on mandatory bond holdings for banks, known as the statutory liquidity ratio, which will help protect lenders from large mark-to-market losses. While banks had previously been asked to cut their hold-to-maturity bond holdings gradually to 23 percent of deposits, the RBI on Tuesday allowed banks to retain them at 24.5 percent of deposits.

"At the moment markets are definitely left guessing about the RBI's intention," said Upasna Bhardwaj, economist at ING Vysya Bank.

(Editing by Tony Munroe, Kim Coghill and Anand Basu)

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Indian rupee at record low again despite RBI intervention

A jeweller poses with silver plates in the form of Indian rupee notes inside a showroom in New Delhi August 19, 2013.

Credit: Reuters/Mansi Thapliyal

By Subhadip Sircar and Swati Bhat

MUMBAI | Wed Aug 21, 2013 8:34am EDT

MUMBAI (Reuters) - The Indian rupee plunged to a record low on Wednesday on heavy dollar demand from importers and as traders fretted over mixed signals from the central bank over its efforts to prop up the currency without choking off economic growth.

The rupee fell 2 percent to a record low of 64.5450 to the dollar despite what traders said was sporadic central bank intervention in both the spot and forward markets.

Measures by the Reserve Bank of India late on Tuesday to support longer-dated debt sent prices of beaten-down bonds sharply higher but also led traders to question the central bank's resolve in defending the currency.

Since mid-July, the RBI has taken steps to tighten cash conditions, which have failed to support the rupee but sent bond yields surging, posing a fresh threat to an economy that grew at a decade-low 5 percent in the last fiscal year.

"Currency market and participants may consider it as a reversal of RBI liquidity tightening measures to prevent currency volatility; thus some pressure on currency may re-emerge," said Anjali Verma, economist at PhillipCapital.

With a record high current account deficit at 4.8 percent of GDP, India is especially vulnerable to funds moving away from emerging markets in anticipation of a winding back of the U.S. Federal Reserve's stimulus program. Traders were looking ahead for clues from Fed minutes to be released later on Wednesday.

Deutsche Bank said in a note on Wednesday that the rupee could slide to 70 in a month or so, although some revival is expected by the end of the year.

The central bank's move to ease cash conditions after tightening them last month to support the rupee highlights the growing costs to the economy of stabilizing the currency.

"The bearishness seen across markets is largely a reflection of the fact that there is no quick fix solution to arrest the rupee fall," said Shakti Satapathy, fixed income strategist at AK Capital.

The partially convertible rupee closed at 64.11/12 per dollar, down 1.3 percent on the day, as importers led by oil refiners bought dollars. The 10-year bond yield closed down 49 basis points (bps) at 8.41 percent, its biggest single-day gain since mid-March 2009.

The yield on the benchmark 10-year bond earlier tumbled as much as 69 bps to 8.21 percent as its price rose.

The benchmark Sensex .BSESN closed down 1.9 percent as the falling rupee dented investor sentiment.

HIGHER BORROWING COSTS

Bond yields are up 86 bps since the RBI first started tightening market cash conditions in mid-July by raising short-term rates to keep rupee speculators at bay, pushing up the cost of credit for corporate borrowers.

Still, the rupee is down 6.7 percent since then.

The RBI said late on Tuesday it will buy 80 billion rupees ($1.26 billion) of bonds on Friday and will pare down its cash management bill sales as its target of pushing up the overnight rate to the central bank's emergency funding rate of 10.25 percent had been achieved.

The RBI relaxed rules on mandatory bond holdings for banks, known as the statutory liquidity ratio, which will help protect lenders from large mark-to-market losses. While banks had previously been asked to cut their hold-to-maturity bond holdings gradually to 23 percent of deposits, the RBI on Tuesday allowed banks to retain them at 24.5 percent of deposits.

"At the moment markets are definitely left guessing about the RBI's intention," said Upasna Bhardwaj, economist at ING Vysya Bank.

(Editing by Tony Munroe, Kim Coghill and Anand Basu)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Indian rupee at record low again despite RBI intervention

A jeweller poses with silver plates in the form of Indian rupee notes inside a showroom in New Delhi August 19, 2013.

Credit: Reuters/Mansi Thapliyal

By Subhadip Sircar and Swati Bhat

MUMBAI | Wed Aug 21, 2013 8:34am EDT

MUMBAI (Reuters) - The Indian rupee plunged to a record low on Wednesday on heavy dollar demand from importers and as traders fretted over mixed signals from the central bank over its efforts to prop up the currency without choking off economic growth.

The rupee fell 2 percent to a record low of 64.5450 to the dollar despite what traders said was sporadic central bank intervention in both the spot and forward markets.

Measures by the Reserve Bank of India late on Tuesday to support longer-dated debt sent prices of beaten-down bonds sharply higher but also led traders to question the central bank's resolve in defending the currency.

Since mid-July, the RBI has taken steps to tighten cash conditions, which have failed to support the rupee but sent bond yields surging, posing a fresh threat to an economy that grew at a decade-low 5 percent in the last fiscal year.

"Currency market and participants may consider it as a reversal of RBI liquidity tightening measures to prevent currency volatility; thus some pressure on currency may re-emerge," said Anjali Verma, economist at PhillipCapital.

With a record high current account deficit at 4.8 percent of GDP, India is especially vulnerable to funds moving away from emerging markets in anticipation of a winding back of the U.S. Federal Reserve's stimulus program. Traders were looking ahead for clues from Fed minutes to be released later on Wednesday.

Deutsche Bank said in a note on Wednesday that the rupee could slide to 70 in a month or so, although some revival is expected by the end of the year.

The central bank's move to ease cash conditions after tightening them last month to support the rupee highlights the growing costs to the economy of stabilizing the currency.

"The bearishness seen across markets is largely a reflection of the fact that there is no quick fix solution to arrest the rupee fall," said Shakti Satapathy, fixed income strategist at AK Capital.

The partially convertible rupee closed at 64.11/12 per dollar, down 1.3 percent on the day, as importers led by oil refiners bought dollars. The 10-year bond yield closed down 49 basis points (bps) at 8.41 percent, its biggest single-day gain since mid-March 2009.

The yield on the benchmark 10-year bond earlier tumbled as much as 69 bps to 8.21 percent as its price rose.

The benchmark Sensex .BSESN closed down 1.9 percent as the falling rupee dented investor sentiment.

HIGHER BORROWING COSTS

Bond yields are up 86 bps since the RBI first started tightening market cash conditions in mid-July by raising short-term rates to keep rupee speculators at bay, pushing up the cost of credit for corporate borrowers.

Still, the rupee is down 6.7 percent since then.

The RBI said late on Tuesday it will buy 80 billion rupees ($1.26 billion) of bonds on Friday and will pare down its cash management bill sales as its target of pushing up the overnight rate to the central bank's emergency funding rate of 10.25 percent had been achieved.

The RBI relaxed rules on mandatory bond holdings for banks, known as the statutory liquidity ratio, which will help protect lenders from large mark-to-market losses. While banks had previously been asked to cut their hold-to-maturity bond holdings gradually to 23 percent of deposits, the RBI on Tuesday allowed banks to retain them at 24.5 percent of deposits.

"At the moment markets are definitely left guessing about the RBI's intention," said Upasna Bhardwaj, economist at ING Vysya Bank.

(Editing by Tony Munroe, Kim Coghill and Anand Basu)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Indian rupee at record low again despite RBI intervention

A jeweller poses with silver plates in the form of Indian rupee notes inside a showroom in New Delhi August 19, 2013.

Credit: Reuters/Mansi Thapliyal

By Subhadip Sircar and Swati Bhat

MUMBAI | Wed Aug 21, 2013 8:34am EDT

MUMBAI (Reuters) - The Indian rupee plunged to a record low on Wednesday on heavy dollar demand from importers and as traders fretted over mixed signals from the central bank over its efforts to prop up the currency without choking off economic growth.

The rupee fell 2 percent to a record low of 64.5450 to the dollar despite what traders said was sporadic central bank intervention in both the spot and forward markets.

Measures by the Reserve Bank of India late on Tuesday to support longer-dated debt sent prices of beaten-down bonds sharply higher but also led traders to question the central bank's resolve in defending the currency.

Since mid-July, the RBI has taken steps to tighten cash conditions, which have failed to support the rupee but sent bond yields surging, posing a fresh threat to an economy that grew at a decade-low 5 percent in the last fiscal year.

"Currency market and participants may consider it as a reversal of RBI liquidity tightening measures to prevent currency volatility; thus some pressure on currency may re-emerge," said Anjali Verma, economist at PhillipCapital.

With a record high current account deficit at 4.8 percent of GDP, India is especially vulnerable to funds moving away from emerging markets in anticipation of a winding back of the U.S. Federal Reserve's stimulus program. Traders were looking ahead for clues from Fed minutes to be released later on Wednesday.

Deutsche Bank said in a note on Wednesday that the rupee could slide to 70 in a month or so, although some revival is expected by the end of the year.

The central bank's move to ease cash conditions after tightening them last month to support the rupee highlights the growing costs to the economy of stabilizing the currency.

"The bearishness seen across markets is largely a reflection of the fact that there is no quick fix solution to arrest the rupee fall," said Shakti Satapathy, fixed income strategist at AK Capital.

The partially convertible rupee closed at 64.11/12 per dollar, down 1.3 percent on the day, as importers led by oil refiners bought dollars. The 10-year bond yield closed down 49 basis points (bps) at 8.41 percent, its biggest single-day gain since mid-March 2009.

The yield on the benchmark 10-year bond earlier tumbled as much as 69 bps to 8.21 percent as its price rose.

The benchmark Sensex .BSESN closed down 1.9 percent as the falling rupee dented investor sentiment.

HIGHER BORROWING COSTS

Bond yields are up 86 bps since the RBI first started tightening market cash conditions in mid-July by raising short-term rates to keep rupee speculators at bay, pushing up the cost of credit for corporate borrowers.

Still, the rupee is down 6.7 percent since then.

The RBI said late on Tuesday it will buy 80 billion rupees ($1.26 billion) of bonds on Friday and will pare down its cash management bill sales as its target of pushing up the overnight rate to the central bank's emergency funding rate of 10.25 percent had been achieved.

The RBI relaxed rules on mandatory bond holdings for banks, known as the statutory liquidity ratio, which will help protect lenders from large mark-to-market losses. While banks had previously been asked to cut their hold-to-maturity bond holdings gradually to 23 percent of deposits, the RBI on Tuesday allowed banks to retain them at 24.5 percent of deposits.

"At the moment markets are definitely left guessing about the RBI's intention," said Upasna Bhardwaj, economist at ING Vysya Bank.

(Editing by Tony Munroe, Kim Coghill and Anand Basu)

View the original article here

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As Indian rupee hits record low, foreign investors baulk

1 of 2. A cashier counts Indian rupee currency notes inside a bank in Mumbai in this August 5, 2013 file photo.

Credit: Reuters/Danish Siddiqui/Files

By Rafael Nam and Himank Sharma

MUMBAI | Fri Aug 16, 2013 6:41am EDT

MUMBAI (Reuters) - The rupee fell to a record low on Friday as measures to curb foreign currency outflows were seen as the latest roll of the dice by policymakers struggling to defend the currency in a slowing economy and a toughening global investment environment.

Far from propping up the currency, the measures from the Reserve Bank of India late on Wednesday to restrict how much its citizens and companies can invest abroad raised fears of outright capital controls that would further undermine the confidence of foreign investors.

Indian policymakers have cobbled together a slew of steps over the past month in a bid to halt the rupee's slide, including the central bank's extraordinary steps on July 15 to drain cash from the system and raise short-term interest rates in an economy already growing at a decade low.

Yet none of the steps unveiled so far have convinced investors that India can attract overseas investments, which is seen as essential in narrowing a record high current account deficit that is the biggest source of the rupee weakness.

The approach is beginning to test the patience of foreign investors, just when emerging markets such as India are already seen as particularly vulnerable ahead of the expected tapering of monetary stimulus by the U.S. Federal Reserve.

"They're coming across as a bit panicky. That's what is damaging sentiment for investors," said Jonathan Schiessl, a fund manager at Ashburton Investments in Jersey, referring to the RBI's actions to defend the rupee.

"Unless things improve, we will probably in all likelihood be withdrawing some weightings from our India positions."

The partially convertible rupee fell to an all-time low of 62.03 to the dollar as trading began. By 0500 ET, it was trading at 61.88, weaker than its Wednesday's close of 61.43/44. Markets were closed on Thursday for a holiday.

SLIP SLIDING AWAY

The central bank's capital outflow restrictions came a day before the dollar spiked after U.S. jobless claims data on Thursday suggested an early end to the Fed's asset purchases.

That prospect looms over India at a time when it is suffering from a current account deficit that hit a record high of 4.8 percent of gross domestic product and an economy growing at a decade low of 5 percent.

Foreign investors have already sold a net $11.6 billion of Indian debt and equities since late May, sparking fears of continued weakness.

India's main NSE index .NSEI fell 4 percent at one point on Friday, while benchmark 10-year bond yields surged to their highest since May 2012 as prices headed for their worst week in four-and-a-half years.

UBS strategist Manik Narain said that as emerging central banks tightened policy to defend their currencies, stocks would be affected, something that is already happening in India.

"India is losing control over the currency and you are starting to see the weakness transmitting to stock markets. There could be a self-perpetuating cycle where currency weakness flushes out equity investors and that takes the rupee weaker still."

CAPITAL CONTROLS?

The RBI's new measures also included further capping the amount that companies can invest abroad.

But overseas investments from India had already been on the wane, averaging a monthly $400 million in the first half of the year from $710 million in 2012, according to DBS data.

The biggest fear is that the RBI's action could be the start of a far stronger move to restrain capital.

"The steps taken so far only target residents, but if this raises expectations that they could potentially resort to capital controls targeted at non-residents, that could have adverse near-term implications for capital flows," HSBC's Chief economist for India and ASEAN Leif Eskesen said.

"It will, therefore, be critical to tread very carefully when it comes to capital controls, to anchor expectations, and also not use it as a substitute for more appropriate and effective measures," Eskesen said in a note to clients.

RUPEE FALLS

As policy makers struggling to find a solution for the rupee's falls, investors expect more weakness ahead. Overseas investors betting via one-month offshore non-deliverable forwards quoted the rupee trading at 62.46, while onshore bets see the rupee at 62.35 within the month.

Meanwhile, a Reuters poll on Thursday showed short positions in the Indian rupee have hit the highest in two months.

At heart of India's failed defense of the rupee so far is that none of the measures unveiled so far have given markets assurance that the country can attract foreign flows in an increasingly difficult global environment.

India last month unveiled plans to further ease restrictions on foreign direct investment (FDI) but previous measures have had mixed results. FDI fell to $36.9 billion in the fiscal year ending in March from $46.6 billion the previous year.

This week it announced measures to attract near-term capital inflows, including by spurring state-run companies to sell debt abroad and raising funds from Indians abroad.

Yet doing so could prove hard without major confidence-inspiring reforms, especially as RBI measures last month to drain cash raise the prospect that borrowing costs will rise.

"We remain underweight on Indian credits as the current spreads do not offer enough compensation in our view," said Arthur Lau, head of fixed income for Asia ex-Japan for Pinebridge Investments in Hong Kong

(Additional reporting by Swati Bhat, Subhadip Sircar & Aradhana Aravindan in MUMBAI, and Umesh Desai in HONG KONG; Editing by Kim Coghill)

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Samsung's 2Q profit record high but below forecast

SEOUL, South Korea (AP) — Samsung Electronics reported a record-high profit for a sixth straight quarter but still disappointed investors who had higher expectations for the world's largest smartphone maker.

Samsung said Friday its April-June net profit jumped 50 percent over a year earlier to 7.77 trillion won ($6.9 billion).

The bottom line was lower than the market forecast of 7.96 trillion won, according to a survey of analysts by FactSet, a financial data provider.

Operating profit was also at a record high of 9.53 trillion won, up 48 percent. Sales rose 21 percent to 57.46 trillion won.

Samsung's latest quarterly report indicates that its explosive profit growth driven by Galaxy smartphone sales may be slowing as smartphones have become mainstream in developed countries. Emerging countries remain a source of growth for smartphone vendors, but consumers there flock to cheaper smartphones, leaving smaller margin to the manufacturers.

Samsung's division that makes and sells handsets, smartphones and tablet computers was the key force behind its latest run of record-setting profit. In 2012, the mobile division contributed 67 percent of Samsung's overall operating profit.

Samsung says its mobile business posted a lower profit compared with the previous quarter on marketing costs. It was first time in a year that the mobile division reported a smaller profit than the earlier quarter.

The Galaxy S4, the latest iteration of its flagship smartphone, hit 10 million sales in the first month of its sales in May, making inroads as Apple did not refresh its iPhone and iPad. But some analysts including those at JP Morgan Chase revised down their sales forecasts of the Galaxy S4 by more than 20 percent, expecting the handset's shipments after the first quarter of launch will weaken.

Many analysts also expect Samsung to mark down the prices of the Galaxy S4 in the fall and winter quarters as rivals, including Apple, will release new models.

Samsung said the smartphone market may expand at a slower rate in the current quarter but it still plans to increase shipments. Samsung has also released variations of Galaxy smartphone series to offer cheaper handsets and fend off competition from Chinese rivals.

The South Korean company is the world's largest smartphone maker. In the January-March quarter, it sold more smartphones than next four vendors combined and one in every three smartphone sold in the period was made by Samsung, according to market researcher IDC.

The company also said Friday that it plans a record-high capital expenditure for this year. Out of 24 trillion won ($21.6 billion) of annual capital spending, 13 trillion won will go to its semiconductor business and 6.5 trillion won will be spent on its display panel business.

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Samsung's 2Q profit record high but below forecast

SEOUL, South Korea (AP) — Samsung Electronics reported a record-high profit for a sixth straight quarter but still disappointed investors who had higher expectations for the world's largest smartphone maker.

Samsung said Friday its April-June net profit jumped 50 percent over a year earlier to 7.77 trillion won ($6.9 billion).

The bottom line was lower than the market forecast of 7.96 trillion won, according to a survey of analysts by FactSet, a financial data provider.

Operating profit was also at a record high of 9.53 trillion won, up 48 percent. Sales rose 21 percent to 57.46 trillion won.

Samsung's latest quarterly report indicates that its explosive profit growth driven by Galaxy smartphone sales may be slowing as smartphones have become mainstream in developed countries. Emerging countries remain a source of growth for smartphone vendors, but consumers there flock to cheaper smartphones, leaving smaller margin to the manufacturers.

Samsung's division that makes and sells handsets, smartphones and tablet computers was the key force behind its latest run of record-setting profit. In 2012, the mobile division contributed 67 percent of Samsung's overall operating profit.

Samsung says its mobile business posted a lower profit compared with the previous quarter on marketing costs. It was first time in a year that the mobile division reported a smaller profit than the earlier quarter.

The Galaxy S4, the latest iteration of its flagship smartphone, hit 10 million sales in the first month of its sales in May, making inroads as Apple did not refresh its iPhone and iPad. But some analysts including those at JP Morgan Chase revised down their sales forecasts of the Galaxy S4 by more than 20 percent, expecting the handset's shipments after the first quarter of launch will weaken.

Many analysts also expect Samsung to mark down the prices of the Galaxy S4 in the fall and winter quarters as rivals, including Apple, will release new models.

Samsung said the smartphone market may expand at a slower rate in the current quarter but it still plans to increase shipments. Samsung has also released variations of Galaxy smartphone series to offer cheaper handsets and fend off competition from Chinese rivals.

The South Korean company is the world's largest smartphone maker. In the January-March quarter, it sold more smartphones than next four vendors combined and one in every three smartphone sold in the period was made by Samsung, according to market researcher IDC.

The company also said Friday that it plans a record-high capital expenditure for this year. Out of 24 trillion won ($21.6 billion) of annual capital spending, 13 trillion won will go to its semiconductor business and 6.5 trillion won will be spent on its display panel business.

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