India Friday 9 October 2009: The rupee should back away from one-year peaks on Friday, following the dollar’s gains versus major units.
Quarterly results from outsourcer Infosys Technologies around 9 a.m. (0330 GMT) will be watched for cues on the sharemarket.
The dollar inched up from 14-month lows against a basket of currencies on Friday, after Federal Reserve Chairman Ben Bernanke indicated that monetary policy might have to be tightened as a recovery takes hold.
The dollar index, a gauge of the U.S. unit’s performance versus six majors, was up 0.3 per cent.
Most Asian indices were in the green at 0220 GMT. The Nikkei was up 0.6 per cent, the Kospi rose 1.5 per cent while the Shanghai Composite index gained 3.1 per cent.
The Nifty India stocks futures traded in Singapore, were up 0.5 per cent.
On Thursday, the partially convertible rupee rose to 46.22 per dollar, its highest since Sept. 26, 2008, before ending at 46.34/35, about 0.7 per cent above Wednesday’s the previous close.
Saturday, October 10, 2009
Rupee gains muscle on dollar shortselling in NDF
Friday 9 October 2009: With hedge funds shortselling the dollar and traders cashing in on the price difference between dollar-rupee contracts quoted in the local market and the offshore non-deliverable forward (NDF) market, the Indian currency has strengthened over the past week, said dealers tracking the forex market.
In the past six sessions, the rupee has risen 3.5% against the dollar and is up almost 13% since its lifetime low of 52.20 in March this year.
Dealers said over the past seven sessions, the dollar has been quoting lower in the NDF market than in the onshore market. So a trader who has the wherewithal to operate in both the markets will buy the dollar in the NDF market and sell it in the onshore market. Such bets, which primarily boil down to these players going long on the Indian currency, have helped the rupee gain strength.
“The euro and British pound are more or less in the same range as they were at the end of September,” said KN Dey, director at Basix Forex, a firm that advises companies on forex exposure. “So there is no question of the rupee getting stronger due to international dollar weakness. In fact, the Indian stock markets in the last week have been more or less choppy,” he added.
In the past few years, several players have cashed in on the difference that has at times surfaced in the dollar-rupee exchange rate between the Mumbai currency market and the unofficial, offshore markets in Singapore, Dubai and London. Multinational banks operating in India and many large corporate houses have been the key players.
This difference as such is the outcome of hedge funds and foreign portfolio managers taking big bets about the direction of the rupee in NDF markets. Indian regulations do not allow them to do operate in onshore markets. There are hedgers, too, who use the NDF market to protect their investments in Indian capital markets.
“Foreign investors led by hedge funds are essentially punting that dollar will weaken against Asian currencies in the coming days,” said Ashutosh Raina, head of forex trading at HDFC Bank.”
This continued selling is leading the dollar in the NDF market to quote at a discount to the onshore market. An entity unwinding his position in the Indian stock market would also correspondingly reverse his long dollar position in the NDF market. This activity too can weaken the NDF dollar,” he added.
In the past six sessions, the rupee has risen 3.5% against the dollar and is up almost 13% since its lifetime low of 52.20 in March this year.
Dealers said over the past seven sessions, the dollar has been quoting lower in the NDF market than in the onshore market. So a trader who has the wherewithal to operate in both the markets will buy the dollar in the NDF market and sell it in the onshore market. Such bets, which primarily boil down to these players going long on the Indian currency, have helped the rupee gain strength.
“The euro and British pound are more or less in the same range as they were at the end of September,” said KN Dey, director at Basix Forex, a firm that advises companies on forex exposure. “So there is no question of the rupee getting stronger due to international dollar weakness. In fact, the Indian stock markets in the last week have been more or less choppy,” he added.
In the past few years, several players have cashed in on the difference that has at times surfaced in the dollar-rupee exchange rate between the Mumbai currency market and the unofficial, offshore markets in Singapore, Dubai and London. Multinational banks operating in India and many large corporate houses have been the key players.
This difference as such is the outcome of hedge funds and foreign portfolio managers taking big bets about the direction of the rupee in NDF markets. Indian regulations do not allow them to do operate in onshore markets. There are hedgers, too, who use the NDF market to protect their investments in Indian capital markets.
“Foreign investors led by hedge funds are essentially punting that dollar will weaken against Asian currencies in the coming days,” said Ashutosh Raina, head of forex trading at HDFC Bank.”
This continued selling is leading the dollar in the NDF market to quote at a discount to the onshore market. An entity unwinding his position in the Indian stock market would also correspondingly reverse his long dollar position in the NDF market. This activity too can weaken the NDF dollar,” he added.
Citibank India lunveils new credit card reward platform
Citibank has launched new reward platform for its credit card holders. Sandeep Bhalla, Citibank India Business Manager said, "This new platform transforms rewards from being an add-on product of card ownership to the center of customer experience."
Currently, customers of Citibank collect some reward points on every purchase through credit card. There is also an option to earn greater reward points by spending at certain stores or by spending on weekends. With the help of new platform, customers can exchange their reward points for over hundred gift vouchers from world's leading brands. Customers can also place their catalogue orders with more ease by calling citiphone or on the Citi rewards site.
The bank also offers customers an easy online redemption. Through alliances with e-commerce portals, Citibank enables its card holders to exchange their reward points for purchases with a choice of over four million products. Purchases can be paid through any combination of rupees and reward points. Customers can also donate their reward points to NGOs (non-government organizations) like CRY and CPAA (Cancer Patients Aid Association), and make a contribution towards child welfare and cancer patients respectively.
The new reward platform also gives its customers the benefit of instant point-of-sale redemption. It enables the customers to redeem their reward points at payment check-out counters of around 190 merchants including Shopper's Stop and Westside.
Citigroup, a global financial services company, is expanded in more than 140 countries. In the last fiscal ended on March 31, 2009, the bank has registered a 20 percent net profit at Rs.2,173 crore.
Currently, customers of Citibank collect some reward points on every purchase through credit card. There is also an option to earn greater reward points by spending at certain stores or by spending on weekends. With the help of new platform, customers can exchange their reward points for over hundred gift vouchers from world's leading brands. Customers can also place their catalogue orders with more ease by calling citiphone or on the Citi rewards site.
The bank also offers customers an easy online redemption. Through alliances with e-commerce portals, Citibank enables its card holders to exchange their reward points for purchases with a choice of over four million products. Purchases can be paid through any combination of rupees and reward points. Customers can also donate their reward points to NGOs (non-government organizations) like CRY and CPAA (Cancer Patients Aid Association), and make a contribution towards child welfare and cancer patients respectively.
The new reward platform also gives its customers the benefit of instant point-of-sale redemption. It enables the customers to redeem their reward points at payment check-out counters of around 190 merchants including Shopper's Stop and Westside.
Citigroup, a global financial services company, is expanded in more than 140 countries. In the last fiscal ended on March 31, 2009, the bank has registered a 20 percent net profit at Rs.2,173 crore.
British Pound Vulnerable as BOE Plots Shocking Policy Shift
The British Pound may see selling pressure with clues from the Bank of England seemingly hinting the central bank is preparing markets for more, not less, monetary stimulus. The Euro may slide if the European Central Bank’s rhetoric doesn’t validate rising rate hike bets, shifting traders’ expectations.
Key Overnight Developments
• Japan's Current Account Narrows as Exports Fall Most Since January• Australian Dollar Soars as Jobs Gain 40K, Unemployment Rate Falls• Euro, British Pound Rise Against US Dollar Ahead of Rate Announcements
Critical Levels
The Euro pushed higher in overnight trading, adding as much as 0.6% against the US Dollar. The British Pound was more subdued but still advanced against the greenback, testing as high as 1.6012. We remain short GBPUSD at 1.6617 and EURUSD at 1.4710.
Asia Session Highlights
Australia unexpectedly gained 40,600 jobs in September, sending the Unemployment Rate lower to 5.7% from 5.8% in the previous month, the first drop in five months. Even more encouraging, most of the gains came from a 35,400 increase in full-time positions. The Australian Dollar surged as the data crossed the wires with traders taking the outcome as validation of RBA Governor Glenn Stevens’ promise to extend rate hikes after the central bank unexpectedly raised borrowing costs earlier this week, pushing to test above the 0.90 level against its US counterpart for the first time in over a year. Traders are now pricing in a 99% probability that the RBA will raise rates by another 0.25% next month and at least 1.75% over the coming year.
Looking ahead, it is important to note that fiscal stimulus has played a key role in the labor market’s resilience after the government spent A$20 billion in cash handouts to consumers and committed A$22 billion to new infrastructure projects. Indeed, a report from the Organization for Economic Cooperation and Development (OECD) has said that Australia’s unemployment rate would be as much as 1.9% higher next year without the government’s intervention, equating to about 150-200K more in job losses. While Treasurer Wayne Swan has promised that fiscal stimulus will remain in place despite the central bank’s move to reverse expansionary policy, opposition parties in the government have strongly argued that spending needs to be wound down to reduce the public deficit and are now launching an inquiry into the government’s policies, with results due at the end of this month. The ruling Labor party does not have a voting majority in Parliament, and it remains to be seen what happens to Australia’s employment situation if the opposition successfully cuts off the flow of public funds to the economy.
In Japan, the Current Account surplus narrowed for the third consecutive month, printing at 1171.2 billion yen in August versus 1265.6 billion yen in the previous month. Exports fell -7%, the most since January, outpacing a -4.5% decline imports. More of the same is likely in the months ahead as the Yen appreciates, making Japanese goods increasingly expensive for foreign buyers. Indeed, last week’s Tankan survey of large manufacturers (who primarily cater to the overseas buyers) revealed firms plan to slash capital investment at the fastest rate in over a decade on expectations that sales will fall -10.5% through the 2009 fiscal year (12 months ending April 2010), more than doubling the drop in FY2008. The currency looks set to extend gains after a trade-weighted index of its value broke higher out of a range that had contained prices since early March late last month.
Euro Session: What to Expect
Interest rate announcements from the European Central Bank and the Bank of England headline the economic calendar in European hours. While both monetary authorities are expected to keep policies unchanged, the UK announcement presents a greater potential for volatility versus its continental counterpart.
BOE Governor Mervyn King has done everything in his power to project a dovish bias since the last rate decision, telling the House of Commons Treasury Committee that policymakers are considering cutting the interest rate they pay on bank deposits to encourage lending and talking down the currency with assertions rebalancing the UK economy was “very necessary [and] the fall in the exchange rate that we have seen will be helpful to that process” in an interview with The Journal. We had speculated ahead of the September 10 rate announcement that the bank was preparing the markets for a change in policy after the asset-buying scheme largely failed to affect lending to the real economy. Indeed, although King has said that the BOE was “beginning to see its impact on the supply of broad money,” the M4 measure of money stock grew at an annual pace of just 12.6% in August, the slowest in a year, while central bank’s own data showed net lending shrank for the first time in at least 16 years in July. While a policy shift had not materialized at that point, the BOE has not let up on hinting that more, not less, monetary easing is ahead despite the recent uptick in leading economic indicators, creating the distinct possibility for a dovish surprise this time around.
Turning the ECB, traders are likely to pay little attention to the actual interest rate decision. In fact, the ECB benchmark (officially unchanged at 1% since May) has not been representative of actual lending rates for some time, with the average cost borrowing Euros overnight oscillating between 0.5 and 0.3 percent since June. Rather, traders will focus on bank President Jean-Claude Trichet’s post-announcement press conference. Key economic data turned in mixed results in recent weeks but the bottom line looks far from encouraging: consumer prices fell more than expected in September, lending to the private sector grew at the slowest pace on record in August, and updated GDP figures revealed that the economy depended more on government spending while consumption and investment shrank at a faster pace than originally expected in the second quarter. While Trichet and company have consistently signaled that rates will remain unchanged well into next year, the steady upward drift in traders’ 1-year yield expectations over the past two months suggests the markets will be disappointed if a hawkish streak does not begin to show itself in the near term, weighing on the Euro.
Key Overnight Developments
• Japan's Current Account Narrows as Exports Fall Most Since January• Australian Dollar Soars as Jobs Gain 40K, Unemployment Rate Falls• Euro, British Pound Rise Against US Dollar Ahead of Rate Announcements
Critical Levels
The Euro pushed higher in overnight trading, adding as much as 0.6% against the US Dollar. The British Pound was more subdued but still advanced against the greenback, testing as high as 1.6012. We remain short GBPUSD at 1.6617 and EURUSD at 1.4710.
Asia Session Highlights
Australia unexpectedly gained 40,600 jobs in September, sending the Unemployment Rate lower to 5.7% from 5.8% in the previous month, the first drop in five months. Even more encouraging, most of the gains came from a 35,400 increase in full-time positions. The Australian Dollar surged as the data crossed the wires with traders taking the outcome as validation of RBA Governor Glenn Stevens’ promise to extend rate hikes after the central bank unexpectedly raised borrowing costs earlier this week, pushing to test above the 0.90 level against its US counterpart for the first time in over a year. Traders are now pricing in a 99% probability that the RBA will raise rates by another 0.25% next month and at least 1.75% over the coming year.
Looking ahead, it is important to note that fiscal stimulus has played a key role in the labor market’s resilience after the government spent A$20 billion in cash handouts to consumers and committed A$22 billion to new infrastructure projects. Indeed, a report from the Organization for Economic Cooperation and Development (OECD) has said that Australia’s unemployment rate would be as much as 1.9% higher next year without the government’s intervention, equating to about 150-200K more in job losses. While Treasurer Wayne Swan has promised that fiscal stimulus will remain in place despite the central bank’s move to reverse expansionary policy, opposition parties in the government have strongly argued that spending needs to be wound down to reduce the public deficit and are now launching an inquiry into the government’s policies, with results due at the end of this month. The ruling Labor party does not have a voting majority in Parliament, and it remains to be seen what happens to Australia’s employment situation if the opposition successfully cuts off the flow of public funds to the economy.
In Japan, the Current Account surplus narrowed for the third consecutive month, printing at 1171.2 billion yen in August versus 1265.6 billion yen in the previous month. Exports fell -7%, the most since January, outpacing a -4.5% decline imports. More of the same is likely in the months ahead as the Yen appreciates, making Japanese goods increasingly expensive for foreign buyers. Indeed, last week’s Tankan survey of large manufacturers (who primarily cater to the overseas buyers) revealed firms plan to slash capital investment at the fastest rate in over a decade on expectations that sales will fall -10.5% through the 2009 fiscal year (12 months ending April 2010), more than doubling the drop in FY2008. The currency looks set to extend gains after a trade-weighted index of its value broke higher out of a range that had contained prices since early March late last month.
Euro Session: What to Expect
Interest rate announcements from the European Central Bank and the Bank of England headline the economic calendar in European hours. While both monetary authorities are expected to keep policies unchanged, the UK announcement presents a greater potential for volatility versus its continental counterpart.
BOE Governor Mervyn King has done everything in his power to project a dovish bias since the last rate decision, telling the House of Commons Treasury Committee that policymakers are considering cutting the interest rate they pay on bank deposits to encourage lending and talking down the currency with assertions rebalancing the UK economy was “very necessary [and] the fall in the exchange rate that we have seen will be helpful to that process” in an interview with The Journal. We had speculated ahead of the September 10 rate announcement that the bank was preparing the markets for a change in policy after the asset-buying scheme largely failed to affect lending to the real economy. Indeed, although King has said that the BOE was “beginning to see its impact on the supply of broad money,” the M4 measure of money stock grew at an annual pace of just 12.6% in August, the slowest in a year, while central bank’s own data showed net lending shrank for the first time in at least 16 years in July. While a policy shift had not materialized at that point, the BOE has not let up on hinting that more, not less, monetary easing is ahead despite the recent uptick in leading economic indicators, creating the distinct possibility for a dovish surprise this time around.
Turning the ECB, traders are likely to pay little attention to the actual interest rate decision. In fact, the ECB benchmark (officially unchanged at 1% since May) has not been representative of actual lending rates for some time, with the average cost borrowing Euros overnight oscillating between 0.5 and 0.3 percent since June. Rather, traders will focus on bank President Jean-Claude Trichet’s post-announcement press conference. Key economic data turned in mixed results in recent weeks but the bottom line looks far from encouraging: consumer prices fell more than expected in September, lending to the private sector grew at the slowest pace on record in August, and updated GDP figures revealed that the economy depended more on government spending while consumption and investment shrank at a faster pace than originally expected in the second quarter. While Trichet and company have consistently signaled that rates will remain unchanged well into next year, the steady upward drift in traders’ 1-year yield expectations over the past two months suggests the markets will be disappointed if a hawkish streak does not begin to show itself in the near term, weighing on the Euro.
CMFIL launches prepaid debit card
With its focus on the unbanked segment in India, Commonwealth Micro Finance India (CMFIL), a part of UK-based Commonwealth Business Council, has launched a multi-purpose prepaid debit card in India.
The company would be launching the cards in Tamil Nadu in the first phase and then spread its wings across India. It aims to sell 20 million cards by 2012 and has obtained a lease finance of Rs. 600 crore for the purpose, reports Financial Chronicle. "The purpose of the card is to bring down the cost of transaction to the end customer. These cards can also be used in retail outlets and a customer can avail a one percent discount in the tied up outlets," said Mahesh Ramachandran, Managing Director and CEO of CMFIL.
The commonwealth card would be available in both physical and virtual forms. The physical card is authenticated through a pin and biometric, while the virtual cards are authenticated through a pin. The physical commonwealth card can be used on points of sale (POS), automated teller machines (ATMs) and other such devices, while the virtual commonwealth card would enable a customer to use mobile banking and mobile commerce services. The company plans to set up three lakh POS across the country by 2012. The card would be a multipurpose card and would also facilitate international money remittances. The company would first launch the card in North Chennai and aims to sell 30,000 cards in the next three months.
The company would be launching the cards in Tamil Nadu in the first phase and then spread its wings across India. It aims to sell 20 million cards by 2012 and has obtained a lease finance of Rs. 600 crore for the purpose, reports Financial Chronicle. "The purpose of the card is to bring down the cost of transaction to the end customer. These cards can also be used in retail outlets and a customer can avail a one percent discount in the tied up outlets," said Mahesh Ramachandran, Managing Director and CEO of CMFIL.
The commonwealth card would be available in both physical and virtual forms. The physical card is authenticated through a pin and biometric, while the virtual cards are authenticated through a pin. The physical commonwealth card can be used on points of sale (POS), automated teller machines (ATMs) and other such devices, while the virtual commonwealth card would enable a customer to use mobile banking and mobile commerce services. The company plans to set up three lakh POS across the country by 2012. The card would be a multipurpose card and would also facilitate international money remittances. The company would first launch the card in North Chennai and aims to sell 30,000 cards in the next three months.
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