Archive for the ‘Foreign exchange market’ Category
Rising rupee / Foreign exchange exposure of Indian IT companies due to appreciation
Cross posted in http://www.acc101.com
In the last few weeks, we have been hearing of the top Indian IT service export companies declaring their Q1 results (remember the Indian financial year is from Apr 1st – Mar 31st) and almost all of them without doubt have been hit by a rising rupee. I have written an earlier post on the same topic and it made for interesting analysis back then – https://ecofin.wordpress.com/2007/05/10/currency-markets-is-the-indian-rupee-really-appreciating/
I read in the papers today about some steps taken by some of these IT majors such as asking employees to work on Saturdays to compensate for their exposure to the rupee appreciation! I am not so concerned about the fact that they are asking their people to work on Saturdays but I am concerned about the fact that they are trying to relate two different events (from an employee perspective in an employee driven organization) to justify their need to make employees work on Saturdays to cover for their risk exposure to the outside forex market. Is this justified – is what I am trying to analyze.
Currency markets – is the Indian rupee really appreciating?
There is a lot of talk in recent days about the Indian rupee appreciating vis-a-vis the US Dollar and that the exporters are losing out on exports etc.
Let us take a holistic view of this in terms of hard facts and numbers rather than go by hearsay. The facts first:
1. The Indian rupee has risen sharply in recent months to just under Rs. 41 to a USD from Rs. 49 in 2002 – an appreciation of nearly 16%. Read the rest of this entry »
Indian financial year ending today – interesting developments/ramifications
Today is the year-end of the Indian Financial system (the Indian financial system works from April 1st to March 31st).
As a fitting goodbye to fiscal 2006 (FY 2006-07), the RBI (the Reserve bank of India) has hiked the repo rate and the CRR (Cash reserve ratio). Read the rest of this entry »
Relationship of the currency markets with Macroeconomic policy
An important aspect of macroeconomic policy is the exchange rate. We will shortly be covering a primer on exchange rate and I will try my best to explain the concepts of real exchange rate, nominal exchange rate, shadow exchange rate that are all important.
What Caused the 1991 Currency Crisis in India?
1991 is regarded by many as the turnaround in the Indian economy. The Indian economy today is streamrolling at an astounding 8% GDP growth rate matched only by its closest rival – China – that is growing by an even better 10% GDP growth rate!
Questions remained unanswered there too. What caused this 1991 BoP crisis? I searched around the Internet for a long time and we even did analysis during the MIB classroom sessions on International macro economic policies to see what went wrong in 1991 in India.
It was primarily regarded as one caused due to a large current account deficit with not sufficient foreign exchange reserves to even sustain a week of imports. India had begun to prepare to mortgage their gold savings with the Bank of England to obtain the cash reserves needed to run the country – a reference to gold standard was made in my previous post quoting Dr. Alan Greenspan – the former Fed chief.
The below analysis was well documented.
What Caused the 1991 Currency Crisis in India
Source: http://www.imf.org/External/Pubs/FT/staffp/2002/03/pdf/cerra.pdf
Globonomics! 