US Dollar, Indian Rupee (INR) and RBI

San Yad

Active member
#1
What is happening with this Dollar vs Rupees..

I think if 47 breaks, it may reach to 49 even.. Is it true?

What RBI is going to do with it?

Rgds.
 

Alchemist

Administrator
Staff member
#2
What is happening with this Dollar vs Rupees..

I think if 47 breaks, it may reach to 49 even.. Is it true?

What RBI is going to do with it?

Rgds.
RBI isn't doing much.

As far as international trade goes, India is a net importer. This trade deficit will always exert downward pressure on the INR.

Importers sell INR and buy other currencies like USD.

In last few years, India was getting lot of FII/FDI flows.

FII's buy INR and sell USD.


These capital inflows were keeping the INR strong.

Now these flows have slowed down (actually reversed) and hence the demand for INR has reduced and INR is going down.

INR may remain weak till capital inflows (FII, FDI etc) increase again.

(Weakening of USD against other currencies may lead to strengthening of INR too).
 

San Yad

Active member
#3
RBI isn't doing much.

As far as international trade goes, India is a net importer. This trade deficit will always exert downward pressure on the INR.

Importers sell INR and buy other currencies like USD.

In last few years, India was getting lot of FII/FDI flows.

FII's buy INR and sell USD.


These capital inflows were keeping the INR strong.

Now these flows have slowed down (actually reversed) and hence the demand for INR has reduced and INR is going down.

INR may remain weak till capital inflows (FII, FDI etc) increase again.

(Weakening of USD against other currencies may lead to strengthening of INR too).
when this reverse effect may happen? in coming week or takes months?

I don't think so far INR crossed the 47 line which most of analysts say it is the a barrier line for INR?

rgds
 

Alchemist

Administrator
Staff member
#4
when this reverse effect may happen? in coming week or takes months?

I don't think so far INR crossed the 47 line which most of analysts say it is the a barrier line for INR?

rgds
INR had gone to 49 per dollar in 2002.

That's its lifetime low.

INR may stabilize if US economy goes into a recession.

A US recession would mean weaker dollar and will also lower India's oil import bill.

(Assuming weaker demand will keep oil prices low).
 

San Yad

Active member
#5
I mean today INR has not crossed 47.. last i saw was 46.95../$

what i mean to say that it breaks 47 level then it may head or cross to 49 which is life time low so far.

Many things we are seeing unexpected.

Cheers!
 
#9
Hi Alchem

please answer some of my questions

RBI isn't doing much.

As far as international trade goes, India is a net importer. This trade deficit will always exert downward pressure on the INR.

Importers sell INR and buy other currencies like USD.
Net importer? Is this in terms of the amount of money spent in imports and gained in exports?
so any country as importer would sell its own currency right? and would be buying the currency of the country from which it is importing!
can u pls send me a link whr we can find net imports and exports of any country...

In last few years, India was getting lot of FII/FDI flows.

FII's buy INR and sell USD.


These capital inflows were keeping the INR strong.

Now these flows have slowed down (actually reversed) and hence the demand for INR has reduced and INR is going down.

INR may remain weak till capital inflows (FII, FDI etc) increase again.

(Weakening of USD against other currencies may lead to strengthening of INR too).
So where is this money going?
The FIIs and the FDIs get in thought the equities market right...is thr any other way they can enter into the Indian economy or any other economy??
A US recession would mean weaker dollar and will also lower India's oil import bill.

(Assuming weaker demand will keep oil prices low).
might sound stupid...still hv to ask..
are we importing oil from US? Why not from the oil producing nations directly?


finally, isn't the US getting most(if not all) of the produced goods from outside? and most of service being outsourced...how are they still able to maintain a strong dollar????
 
Last edited:

Alchemist

Administrator
Staff member
#10
Net importer? Is this in terms of the amount of money spent in imports and gained in exports?
so any country as importer would sell its own currency right? and would be buying the currency of the country from which it is importing!
can u pls send me a link whr we can find net imports and exports of any country...

So where is this money going?
The FIIs and the FDIs get in thought the equities market right...is thr any other way they can enter into the Indian economy or any other economy??

might sound stupid...still hv to ask..
are we importing oil from US? Why not from the oil producing nations directly?

finally, isn't the US getting most(if not all) of the produced goods from outside? and most of service being outsourced...how are they still able to maintain a strong dollar????
Yes, when a country imports, it sells its own currency and buys currency of the country from where it is importing.

When a country exports, it gets its own currency and sells currency of the country to which it is exporting.

Here is RBI's annual report on the India's balance of payments for FY 2008.

Note A5 and B8.

We had a deficit of Rs 70357 crore in our trade account, but a surplus of 433903 crore in our capital (investments) account. Thus, out net inflows were positive.

Lot of money was coming in as investments to India.

This is partially reversing now. Many investors are selling Indian stocks and taking back their money...:D.

=================================

FII comes via equity markets.

FDI is directly passed on to the companies. Thus, it is call "Foreign Direct Investment".

Besides equity investments. money also comes as debt investments.

Foreigners buy debt of Indian corporates.

Then, there are remittances (e.g. Indians abroad sending money back to India).

=================================

We don't import oil from US.

US itself is a big importer of oil and US demand is a key factor in determining global crude oil prices.

US goes into recession

= less demand for oil in US.

= US imports less oil.

= lower prices of oil worldwide.

=================================

Imports and exports are not the only factor that determine currency rates.

There are many other factors like capital flows.

One major reason why US has been able to maintain a strong dollar in spite of a trade deficit is that it gets lots of investments.

Countries like China buy a lot of US debt.

Also, many countries maintain a part of their foreign exchange reserves in US dollar. This means that as these economies grow, they will need more dollars in their reserves.
 
#11
but in other countries I believe you can freely trade in forex but not in India. :(.
There are many things that are allowed in other countries and are prohibited in India - it's not an argument. :).

As mentioned several times already on this forum, there are Forex brokers in India already, but I guess only INR/USD pair is available. As far as I understand, the reason for that is currency exchange restrictions of RBI. In order to trade USD/EUR for instance, you first need to get USD or EUR which means you have to exchange your currency - and this is a problem in India, it's highly regulated by RBI - there are defined purposes and limits of exchanging currency.
 
Top