Monday, November 21, 2011

Rupee is heading towards the critical resistance of 52

The rupee slipped towards fresh 32-month lows today weighed by foreign fund outflow concerns
from domestic shares and dollar demand from state-run oil refiners. The local currency ended lower
by 0.8% v/s the US dollar on Friday at 51.3350, after sliding to 51.41 during trade.
Asian stock are heading lower today as a change of government in debt-laden Spain and Singapore's
warning of a sharp growth slowdown underlined the challenges facing the world economy. The fifth
casualty on the unstoppable spreading of the debt crisis tsunami in Europe has taken its toll in the
form of a new government formed in Spain, following the previous leadership debacle in Greece,
Italy, Portugal and Ireland. Spain dumped its ruling Socialist government Sunday for the conservative
leadership of Mariano Rajoy, who inherits an economy wracked by debt and an unemployment
nightmare which at more than 21% is the highest among the 17 nations that use the euro.
Adding to pessimism, Singapore today has warned that its economy will likely suffer a sharp
slowdown next year as export demand from developed countries wanes. Because of its high reliance
on trade, Singapore is often a bellwether for the rest of Asia.
Today, Japan's Nikkei index fell 0.2% to 8,354.65. Hong Kong's Hang Seng was 2.3% lower at
18,068.51. South Korea's Kospi index dropped 1.3 % to 1,815.48.
The EURUSD has been stable from Friday overnight session and currently above 1.35 mark. The
USDINR is now heading towards 52 mark on deteriorating current account and weak capital account.
The Indian rupee is expected to trade weak in the short term on weak external sector, slowing
industrial growth along with European debt problem. India’s trade deficit widened the most in
October in at least 17 years.

Merchandise exports rose 10.8% to $19.9 billion last month from a year earlier, Commerce Secretary told reporters. Imports gained 21.7% to $39.5 billion, causing a trade deficit of $19.6 billion.
That’s the biggest shortfall since April 1994. In a plan to boost the capital account which has been financing the huge current account deficit, India on Thursday decided to increase the limit of foreign
institutional investors (FIIs) investment in government securities bonds by $5 billion to $15 billion and in corporate bonds by a similar amount to $20 billion. The enhanced total limit for FII
investment in government bonds would be $15 billion from the existing limit of $10 billion and the enhanced total limit for FII investment in corporate bonds would be $20 billion from $15 billion.

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