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Monday 13 August 2012

Is this value of the rupee?

MUMBAI: The rupee weakened in recent months is seen as more negative among the various macro-economic numbers. However, the local currency stood at the mid-50 s against the dollar could benefit the trade balance by $ 120 billion

According to a report by Credit Suisse, 50 is probably the new 40 of the rupee with the USD-EUR appear to have achieved the balance at this level. As businesses and consumers accept this level as the new normal are not huge implications for the economy. Last week marked a year of S & P downgrades U.S. - A move which caused a sharp fall in the value of the rupee and other currencies, as investors sought the safe haven dollar. "We estimate that about one billion U.S. $ 60 of imports can be substituted, and U.S. $ 60 billion of exports could see an increase (with the solution of the rupee in this light)" , the report said. According to Credit Suisse, boosting the economy would be limited, since $ 120 billion is only about 7% of GDP. "But this is consistent with our thesis that concerns about a crisis in the rupee is crazy," said the report,

After spending fourteen years in the 40's is the national currency seems to have stabilized in most mid-50, with any forex trader talking about it dates back 40 years. While India has traditionally had a current account deficit, the currency has been under pressure in the last 12 months, the dollar is gaining ground thanks agaist the euro to the European crisis. At the same time, no signs of a resumption of capital flows, there is little room for the rupee to gain from current levels.

The report has tried to CS segment of companies sensitive to exchange rates in three categories: products that are imported because of "unavailability", "lack of capacity ',' cost advantage 'and the report constraints. the "capacity" highlights Bajaj Auto - cheap motorcycles exported worldwide, the auto-parts maker Bosch, drug manufacturer ABAP Division, Cummins generator set manufacturer and battery manufacturer Exide Industries, the beneficiaries of a rupee weak.

The report is more optimistic in the IT manufacturing companies and jewels that are considered natural beneficiaries of a weak rupee. "While exports of jewelry are the second largest category after gross exports of petrochemicals, which must necessarily be accompanied by imports of rough diamonds and gold / silver / platinum," said the report. IT sector has also been constrained by high domestic wages, but the fall in the value of the rupee means that in dollar terms wages have returned to FY07 levels. "This should help offset most of the decline in profitability as the pyramid is compounded by the slowdown in growth," said the report.

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