Rupee Rose on Earning Conversion | ForexGen Latest News

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The Indian rupee rose today as the exporters had to convert their overseas earnings after the India’s currency has been losing significantly to the U.S. dollar in May.

The rupee recovered from two days of losses this week as the oil continued to drop today, easing the concerns that the commodity importers will have to sell even more rupees for dollars. On the other hand, large exporters found 13-month high USD/INR rate attractive enough to start converting their overseas earnings.

The demand for rupee formed by the exporters offers a nice support level for the Indian currency as at such low levels natural currency conversion will always be profitable for some companies. Apart from that, dollar demand may slow even further if oil prices go for a large scale correction soon.

From the other point of view, in case energy prices continue to rise at a current pace, the India’s current-account deficit may double by the year’s end. Judging from that, such investment banks as JPMorgan Chase & Co. and Goldman Sachs Group Inc. decreased their forecasts on rupee.

USD/INR dropped almost 0.3 percent to 42.855 as of 8:11 GMT; it may continue to drop even further during the next weeks, after gaining almost 5.3 percent in May.

Yen Falls against Carry Trade Counterparts | ForexGen

The Japanese yen extended its decline against its traditional carry trade counterparts today as the Asian stock markets soared after the U. S. Memorial Day holiday ended.

Yen dropped significantly against the Australian and New Zealand dollars (the favorite high-yielders that usually gain the most form the carry trade popularity) today after the financial market rally in Asia showed an improved confidence in the global economy. Low-cost yen-based borrowings spurred growth of demand for the Australian 7.25 percent and New Zealand 8.25 percent yields.

Currency analysts believe that the Japanese yen is currently at risk, because more traders turn back to carry trade as the fears of recession in U.S. fade and the global growth may sustain the high rates in such countries as Australia, New Zealand and United Kingdom.

Yen traded near one month low against the euro, while being almost unchanged against the Great Britain pound. Despite worsening state of the domestic housing market U.S. dollar also managed to gain against the yen today.

EUR/JPY rose today from 163.06 to 163.38 as of 8:30 GMT with a daily high at 163.88. AUD/JPY grew up from 99.27 to 99.69 and NZD/JPY rose to 81.76 after opening at 81.27 and reaching a daily maximum at 82.15.

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Yuan at Highest Level since End of Peg

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The Chinese yuan rose to the highest rate against the U.S. dollar since the scrapping of the peg in 2005 as the investors expected China to quicken yuan gains in order to cut the inflation growth.

The China’s short-term bonds fell today as their yields rose on speculation that the People’s Bank of China will increase interest rates. The Chinese currency appreciated by 5.3 percent against the U.S. dollar this year — close to the whole 2007 gain of 7 percent.

The primary concern for the government remains the accelerating inflation, which rose to 8.7 percent in February — its highest level in the last 11 years. Majority of the analysts believe that, while the inflation remains that strong, the central bank will keep relying on yuan’s strengthening.

The devastating earthquake in Sichuan province that killed more than 60,000 people and left many families homeless in mainland China will probably support current monetary policy, because the cost of food and other vital goods is skyrocketing in the region.

The yuan gained as little as 0.08 percent today against the dollar — USD/CNY declined to 6.9364 in Shanghai as of 4:17 GMT, from 6.9417 close rate last week. The currency pair has fallen for 8 days in a row — its longest streak since March 20.

Rupee to Gain 9% This Year on Higher Rates | ForexGen

Fortis Bank analysts expect Indian currency to rise 9 percent by the end of this year as the Reserve Bank of India will have to increase interest rates to fight the accelerating inflation growth.

India’s currency is currently the second worst performing among ten most-traded Asian currencies (excluding the Japanese yen) this year. Yesterday it reached its lowest rate against U.S. dollar in 13 months.

Reserve Bank of India will probably have to go up with the interest rate, which is currently at 7.75 percent, in order to hold down the record-breaking inflation that accelerated to 7.83 percent in late April and is above the bank’s estimate of 5.5 percent:

Economic growth is pretty much intact but inflation is a new threat and there is no scope for the central bank to have a neutral monetary policy approach… I am leaning towards believing that the central bank will tighten monetary policy further, despite what the economy is going through, and will also use the exchange rate.

USD/INR reached 43.21 rate yesterday on Forex — the lowest since April 3, 2007 and is currently trading near 42.725 as of 12:27 GMT. Fortis Bank expects it to go down to 39.4 by the end of 2008.

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New Zealand Dollar Grows on Taxes Cut | ForexGen Reports

The New Zealand dollar rose today against all other major currencies at a fastest pace in months as the Finance Minister Michael Cullen cut the income tax supporting the national economy.

Kiwi (a nickname for the New Zealand’s currency) climbed today for a third consecutive day against the U.S. dollar — it’s biggest gain since late February as the investors favored high-yielding local bonds over the U.S. notes on an increased yield gap.

Michael Cullen said today in his 2008/2009 budget that the tax cuts, which will start on October the 1st this year, will increase the people’s buying power by between 22 and 55 billion New Zealand dollars, busting the national economic growth.

Market analysts believe that the government won’t stop on tax cutting only in order to improve the output growth. The record high New Zealand’s interest rate (8.25 percent), which for a long time was a boon to the NZD’s growth (especially against yen), will be lowered by at least 1 percent during the next 12 months. But these expectations are not yet included into the Kiwi’s Forex value.

NZD/USD rate grew today from 0.7773 to 0.7855 as of 8:26 GMT with a daily maximum at 0.7893 (a highest value since May 7). NZD/JPY rose from 80.08 to 81.20 with a daily high at 81.39, as the carry trade positions increased. AUD/NZD declined at a fastest pace since January 22 — it went down from 1.2375 to 1.2188 with a daily minimum at 1.2185 as of 8:26 GMT.

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