Indian Rupee vs. US Dollar (USD $)
Fall of Rupee in 2013 -
reasons |
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-->Worsening CAD position -->Large Gold Import which made the import bill heavier and is blamed as the single most important reason for falling rupee in April-June, 2013. Gold import accounted for 11% of country's import bill. -->Widening trade deficit leading to demand from importers. Current Account Deficit (CAD) occurs when total imports of goods, services and transfers are higher than exports resulting in outgo of foreign exchange. -->FIIs selling and exiting the Debt market and Equity market leading to a cascading effect on Capital outflow. --> International cues, such as US Federal Reserve Chairman Ben Bernanke's statement that CAD countries should depreciate their currencies. Currencies of Countries with CAD such as Brazil, Chile, India, Mexico, Turkey, South Africa have taken a hit following the statement. --> Tightening of Quantitative Easing (QE) by Federal Reserve of US resulted in tight liquidity in the market. However, US Federal Reserve's decision in December to bond buying by $10bn a month commencing from Jan 2014 to $75bn on the back of improved US economic data did not adversely impact the market as the same was already factored in. --> Offshore currency punters (speculators) putting pressure on Rupee through NDF (Non Deliverable Forwards) deals. These speculators comprise of international banks, multinationals, hedge funds and few local business houses. (a) The deals are typical one-to-one OTC deals made in Singapore, London and New York even after closure of Indian markets. (b) NDFs are forward transactions settled in USD because the Rupee, being a non-convertible currency, cannot be delivered outside India. (c) NDF deals are financed through Credit Lines from overseas FIs. The best part is no trade document is needed to cut these deals. (d) The impact of NDF trade seeps into forex market in India & moves the Rupee. In last 10 years, the NDF market has become big enough to influence rupee. (e) RBI, like South Korean Central Bank, can intervene in the NDF market and send ASKALL foreign & local companies to tell their counterparts abroad not to trade in NDFs. |
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Journey of Rupee-Landmarks |
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* On 6/6/1966,
Rupee is devalued from Rs4.67 for a
dollar to Rs 7.50 a dollar.
* On 15/8/1971, convertibility of USD suspended. End of Bretton Woods system. ($=Rs7.5) * On 01/01/1974, Foreign Exchange Regulation Act,1973 comes into force. ($=Rs8.2) * On 09/12/1974,Asian Clearing Union (ACU) established to facilitate payment. ($=Rs8.1) * On 25/09/1975, exchange value of Rupee linked to a basket of selected currencies . ($=Rs8.9) * On 01/11/1975, FCNR account scheme introduced to encourage private remittances from abroad. ($=Rs8.7) * On 01/01/1982, EXIM Bank established. ($=Rs9.1) * On 01/07/1991 & 03/07/1991,Rupee devalued in two stages.($=Rs23.1) * In March 1992,Dual Exchange Rate System (LERMS) introduced. ($=Rs28.7) * In 1993, Unified Exchange rate comes into practice.($=Rs31.2) * In August 1994, Rupee made convertible in the current account.($=Rs31.4) * In June 2000, Foreign Exchange Management Act, 1999 replaces FERA. ($=Rs44.7) * On15/09/2008, Lehman Brothers filed for bankruptcy protection. Recession starts. ($=Rs46.1)
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Regulatory measure to arrest fall of Rupee-2013 |
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* Govt. has raised FDI (Foreign Direct Investment ) Limit in 12 sectors and announcement was made on 16/07/2013. The Sectors are - Asset Reconstruction: from 74% to 100% out of which 49% under AR and rest through approval from FIPB. Petroleum Refining: from 0% to 49% Insurance: from 26% to 49% under AR Telecom: from 74% to 100% out of which 49% under automatic route(AR) and rest with approval from FIPB. Courier Services: from 0% to 100% Credit Information Companies: from 49% to 74% Tea Plantation: from 0% to 49% Single Brand Retail: from 49% to 100% out of which 49% under AR and rest through approval from FIPB. Power Exchanges: from 0% to 49% under AR. Stock Exchanges, depositories: from 0% to 49% under AR Civil Aviation: no change in existing 49%. However, higher investment may be considered in state-of-the-art technology production by CCS Defence Production: no change in existing 26%. However, higher investment may be considered in state-of-the-art technology production by CCS FDI under Automatic Route (AR) does not require prior approval either by the Center or the RBI. Investors are only required to notify the concerned Regional Office of RBI within 30 days of receipt of inward remittances and file required documents with that office within 30 days of issue of shares to foreign investors. * RBI raised the limit of online repatriation of export proceeds by over 3 fold to US$10,000 from current level of US$ 3000. Now, the value per transaction for export related remittances routed through OPGSPS ( Online Payment Gateway Services Provider) raised to US$ 10000. * RBI made it mandatory for units in SEZs to repatriate full value of export within 9 months from the date of export as against earlier 12 months. * The Govt. has enhanced the limit for foreign investments in Govt. Securities (G-Sec) by $ 5 billion ( equivalent to about Rs 29137 crore) from $25 billion to $30 billion with immediate effect i.e. 13/06/2013 * Banks have been prohibited from doing proprietary trading in foreign currency. * Govt. is contemplating idea of issuing NRI bonds / Offshore Rupee Bonds to raise FDI. This will develop long term maturity corporate & sovereign debt market and facilitate foreign fund flow into longer maturity instruments. In the past, Govt. has used NRI Bond issue through SBI as a tool to stem rupee fall on 3 occasions in 1991,1998 (Resurgent India Bonds ) & 2001 (India Millennium Deposits). But in the present scenario, SBI favors raising of sovereign debts. In Asia, Indonesia, the Philippines, Sri Lanka, Vietnam, In Europe-Russia, Bulgaria, Poland, Georgia, In America-Mexico, Chile, Ecuador have opted for the Sovereign bond issue to augment their foreign exchange reserve. * Ministry of Finance is weighing the option of pruning import of non-essential goods comprising of luxury cars, cosmetics, certain exotic foods & beverages, gold, silver and foreign alcohol. RBI has already imposed restrictions on gold imports. As per the new norms, all banks and authorized agencies will have to ensure that at least 20% of the imported gold is made available for exports and a similar amount is retained with the customs. * Realization period for Exporters Cut: On 22/07/2013, RBI brought down the period of realization and repatriation for exporters of goods and software to 9 months from earlier 12 months, a move which could shore up foreign exchange inflows. In November,2012, RBI had increased the time limit to bring in export earnings to 12 months from 6 months at that time in view of global slowdown. * On 01/08/2013, RBI tightened hedging rules by making it mandatory for FIIs to obtain consent of holders of Participatory notes and Offshore derivative instruments before hedging. As far as the applicability of the clarifications issued in the circular RBI/2013-14/169 A.P. (DIR Series) Circular No. 18 dt. 01/08/2013 to Participatory Notes (PN) /Overseas Derivative Instruments (ODI) issued by the FIIs is concerned, It is therefore clarified that if an FII wishes to enter into a hedge contract for the exposure relating to that part of the securities held by it against which it has issued any PN/ODI, it must have a mandate from the PN/ODI holder for the purpose. Further, while AD Category bank is expected to verify such mandates, in cases where this is rendered difficult, they may obtain a declaration from the FII regarding the nature/structure of the PN/ODI establishing the need for a hedge operation and that such operations are being undertaken against specific mandates obtained from their clients. |
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Special Currency Basket |
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Definition--A group of securities whose weighted average is used to determine the value of an obligation or the value of another currency. For instance, a country that does not peg the value of its currency to a single other currency, such as the U.S. dollar, could value its currency to the value of a currency basket comprised of Euros, U.S. dollars, and Japanese Yen. At present, special currency basket comprises of USD, GB Pound, Euro and Japanese Yen.
An authorised person has to take previous permission of
the Reserve Bank of India (RBI) without which he can
not engage in any transaction involving any foreign
exchange or foreign security which is not in
conformity with the terms of authorization under section
10(4) of the Foreign Exchange Management Act (FEMA),
1999.
In accordance with sub-section (1) of Section 10 of FEMA Act Authorised person means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised to deal in foreign exchange or foreign securities.
As per the powers conferred by sec. 11(1) of FEMA
Act, 1999, the RBI may give any direction to the
authorised persons in regard to making of payment or the
doing or desist from doing any act relating to foreign
exchange or foreign security.
As per Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR , the value of Rupee to be calculated against special currency basket. Rates applicable for all Authorised Dealers Category-I (AD Category-I) banks.
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Onshore Dollar Premium: 1 year : 474.5 points on 22/07/2013, highest since June, 1998. 6 months : 259.50 points on 22/07/2013 Offshore Dollar Non-deliverable forwards: 1 month contract: 60.19 as on 22/07/2013 3 month contract: 61.01 as on 22/07/2013 Currency future market in NSE / MCX-SX, United Stock Exchange : Most traded Near month dollar/Rupee contracts closing rate : Rs 59.84 as on 22/07/2013 |
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Rupee Exchange Rate- Live |
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