The rupee has touched a one-month high to closed at 59.6455 on hopes of strong fund flows as the BSP lends support to the government on the FDI issue in the Rajya Sabha explains
The single factor that guided the rupee was the question of the enactment of the foreign direct investment (FDI) in multi-brand retail. There is a direct expectation of an inflow of dollars, even if it is not immediate. The rupee also rose on opinion that the BSP support to the government signals reform and therefore the foreign institutional investor (FII) flows which have been so good in the past few months will continue.
Chidambaram said that net gold imports have fallen from an average of $135 million in the first half of May to $36 million in the second half of last month, adding it should have a positive impact on markets.
He added the performance of crude oil, natural gas and fertiliser sectors are key concerns for the government.
Chidambaram also welcomed Wednesday's measures from the market regulator to increase government debt limits for long-term investors, and said Indian bond yields should still attractive to foreign investors.
The single factor that guided the rupee was the question of the enactment of the foreign direct investment (FDI) in multi-brand retail. There is a direct expectation of an inflow of dollars, even if it is not immediate. The rupee also rose on opinion that the BSP support to the government signals reform and therefore the foreign institutional investor (FII) flows which have been so good in the past few months will continue.
The rupee market needs those inflows much more because the trade deficit in October was as high as USD 21 billion. So every month if you need USD 21 billion just to bridge the difference between what importers are buying and exporters are selling, then obviously you need half a billion dollars a day, in fact almost a billion dollars every trading day to bridge the deficit.
However, experts are unsure of how much upside there will be because globally the dollar is a tad strong. The cutting of growth estimates by Draghi for the euro zone has made the euro a tad weaker versus the dollar. So the dollar is up. The morning Korean bond has opened a little weak because of fears of global growth. So there could be a bit of a cap to the rupee’s rally, but the fact that it will start with a spring is sure.
There for The finance minister made an appeal to Indians to stop buying gold.
"India does not produce an ounce of gold. You pay in rupee, but the government has to spend dollars to buy gold," Chidambaram said.
" I do not buy gold. To think that gold is the safest investment is wrong, " the finance minister said.
Chidambaram said that net gold imports have fallen from an average of $135 million in the first half of May to $36 million in the second half of last month, adding it should have a positive impact on markets.
He added the performance of crude oil, natural gas and fertiliser sectors are key concerns for the government.
Chidambaram also welcomed Wednesday's measures from the market regulator to increase government debt limits for long-term investors, and said Indian bond yields should still attractive to foreign investors.
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