Hi Friends,
As said in my 28th August post today U.S.$ touched 48 Rupees in Intraday closing around 47.70. Now what is Next? One has to wait and Watch till Friday or Monday for future move. Current chart suggest that it may take some pause & cool down for sometime before further move.
Some of the Key reasons for sudden spurt looks like :-
1) FII's Continuous coming out of Indian Market & taking away Money Out of India.
2) More Imports then Exports by Various Indian Industries leads to more demand of $.
3) High rate of Crude Oil Basket compair to previous Month India Imports.
4) Various Quarterly Payments by RBI towards, payment of Interest Installments & Loan Installments to various world Bodies like World Health Organisation, World Bank Loan, Oil Import Bill Payment, Inter Country - Inter International Bank Loan settlement, Half yearly Indian Bank's Account Closing Foreign Exchange Loans adjustments etc.
5) When due to reasons mentioned above in 4) RBI himself become buyer of $, he can't sell $ in open market & thus can't control Rupee falling, which gives multiple effect & due to more demand for $ against Rupee gives sharp cut to Rupee Value in International Market, due to which most importers who has not booked their forward contracts gets panic & try to book their import commitment as fast as possible to survive from further weakening of Rupee.
Some of the Key effects due to Weak Rupee:-
1) Higher price of Crude Oil Import, resulting hike in Domestic Petrol Price or if No Hike then Bordon on domestic Oil Importing company. Crude Oil Bill is the Single largest Import Product & using Highest Foreign Exchange to pay Oil Import Bill.
2) If Government Hikes the price of Petrol then it will be having circular effect --> Hike in Transport price, Hike in Passenger Fare, Hike in Foods & Vegetables & other services --> Bringing more Inflation --> Compel to bring more Harden Steps towards Monetary Policy ---> Lower GDP Growth, --> Unfavorable Balance of Payment,--> More Fiscal Deficit means all Gloom & Doom for future, Resulting less demand & Less Industial Production & Growth.
3) If Government Does not hike the price of Petrol then, Oil importing & refining & marketing Company will have drastic effect.--> To survive their loss Govt. will issue more Petro Bonds to them, --> to adjust that Petro Bond payment, Govt. will borrow more from RBI and/or print more money -->thus will have more debt. Bordon --> will then either sell More Public Assets like Navratna's or sell of Lands/Mining Rights etc. to repay the Money Borrowed or --> will further issue more bonds to Borrow & repay the earlier Loans --> This will ultimately result in to More Fiscal & Monetary Deficit --> will lead to more Deficit Financing -->due to which faith of Foreign countries will more shaken & will think Thrice to Invest in India --> Resulting further downgrade of Indian Rating --> Resulting further weakening of Rupee against all Major Currencies.
4) Last but Not the Least If FII still continue to sell then FII will be Biggest looser if they have Brought Money say around @44 in the Mid Month of Oct.2010 & Taking away @48, they will make 8-9% Straight loss in Currency Exchange Rate & Other loss in Stock price to be added.
Please note the above mentioned points are ultimately making 'Aam Adami' the so called 'Mango People' more Poorer and more Population will come below Poverty Line.
Though it may seem scary picture the intention is Not to Scare anyone but to Awake, the events mentioned above are inter linked & assumed on certain basis & they may or may not happen, will ultimately depend on Government & RBI's further steps. Worse scenario can be avoided by RBI by taking some Crooked Thinking & taking some Hard Steps towards Unproductive Activity.
There is a saying 'Export or Perish' but at this Junction it looks like 'Ulta'.. Opposite.
Looks like too lengthy ... so more Next time.. Till then stay Tuned..
As said in my 28th August post today U.S.$ touched 48 Rupees in Intraday closing around 47.70. Now what is Next? One has to wait and Watch till Friday or Monday for future move. Current chart suggest that it may take some pause & cool down for sometime before further move.
Some of the Key reasons for sudden spurt looks like :-
1) FII's Continuous coming out of Indian Market & taking away Money Out of India.
2) More Imports then Exports by Various Indian Industries leads to more demand of $.
3) High rate of Crude Oil Basket compair to previous Month India Imports.
4) Various Quarterly Payments by RBI towards, payment of Interest Installments & Loan Installments to various world Bodies like World Health Organisation, World Bank Loan, Oil Import Bill Payment, Inter Country - Inter International Bank Loan settlement, Half yearly Indian Bank's Account Closing Foreign Exchange Loans adjustments etc.
5) When due to reasons mentioned above in 4) RBI himself become buyer of $, he can't sell $ in open market & thus can't control Rupee falling, which gives multiple effect & due to more demand for $ against Rupee gives sharp cut to Rupee Value in International Market, due to which most importers who has not booked their forward contracts gets panic & try to book their import commitment as fast as possible to survive from further weakening of Rupee.
Some of the Key effects due to Weak Rupee:-
1) Higher price of Crude Oil Import, resulting hike in Domestic Petrol Price or if No Hike then Bordon on domestic Oil Importing company. Crude Oil Bill is the Single largest Import Product & using Highest Foreign Exchange to pay Oil Import Bill.
2) If Government Hikes the price of Petrol then it will be having circular effect --> Hike in Transport price, Hike in Passenger Fare, Hike in Foods & Vegetables & other services --> Bringing more Inflation --> Compel to bring more Harden Steps towards Monetary Policy ---> Lower GDP Growth, --> Unfavorable Balance of Payment,--> More Fiscal Deficit means all Gloom & Doom for future, Resulting less demand & Less Industial Production & Growth.
3) If Government Does not hike the price of Petrol then, Oil importing & refining & marketing Company will have drastic effect.--> To survive their loss Govt. will issue more Petro Bonds to them, --> to adjust that Petro Bond payment, Govt. will borrow more from RBI and/or print more money -->thus will have more debt. Bordon --> will then either sell More Public Assets like Navratna's or sell of Lands/Mining Rights etc. to repay the Money Borrowed or --> will further issue more bonds to Borrow & repay the earlier Loans --> This will ultimately result in to More Fiscal & Monetary Deficit --> will lead to more Deficit Financing -->due to which faith of Foreign countries will more shaken & will think Thrice to Invest in India --> Resulting further downgrade of Indian Rating --> Resulting further weakening of Rupee against all Major Currencies.
4) Last but Not the Least If FII still continue to sell then FII will be Biggest looser if they have Brought Money say around @44 in the Mid Month of Oct.2010 & Taking away @48, they will make 8-9% Straight loss in Currency Exchange Rate & Other loss in Stock price to be added.
Please note the above mentioned points are ultimately making 'Aam Adami' the so called 'Mango People' more Poorer and more Population will come below Poverty Line.
Though it may seem scary picture the intention is Not to Scare anyone but to Awake, the events mentioned above are inter linked & assumed on certain basis & they may or may not happen, will ultimately depend on Government & RBI's further steps. Worse scenario can be avoided by RBI by taking some Crooked Thinking & taking some Hard Steps towards Unproductive Activity.
There is a saying 'Export or Perish' but at this Junction it looks like 'Ulta'.. Opposite.
Looks like too lengthy ... so more Next time.. Till then stay Tuned..
