INR being killed in the FX market

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And the big fear is that these crooks will come back in power again next time. I would probably say, if you have an option leave the country and go somewhere else.
 
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swatkats said:
No way. Its going to 2nd Front this time. NDA!

http://economictimes.indiatimes.com...acing-problems-today/articleshow/22106071.cms Worth a Read.
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What i noticed in the paper today is food security bill gets passed and more panic ensues because this bill will increase the CAD. It makes me think all this song & dance was building up to the bill being passed. Its done now. How much more worse will it get.

What is point of food security bill, you think it will help get more votes ? Of course. Elections are not being held tomorrow because nobody is ready for it. 6 months from now how will things be, that is the question.

I think a change of govt would be good, UPA since 2004, time for some new ideas but i don't think it will be that easy.
 
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UPA should not come again into power. The worst one which ruled here(atleast my state). Every of them should be hanged publicly. They will do anything for votes.
They ate up all the assets of public in the form of lands, bribes and many more.They feel public assets as their food and eating up all of them.
Their slogan should be "Khaoo - aur - Khaanedho".
 
mojo said:
UPA should not come again into power. The worst one which ruled here(atleast my state). Every of them should be hanged publicly. They will do anything for votes.
They ate up all the assets of public in the form of lands, bribes and many more.They feel public assets as their food and eating up all of them.
Their slogan should be "Khaoo - aur - Khaanedho".
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+1. Haters of Andhra Congress.
 
Crazy_Eddy said:
https://scripbox.com/blog/making-sense-of-the-fall-of-the-rupee/
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The article tries to make sense of the fall but is a good example of postmortem analysis. Doing so you can come up with up teem reasons to attribute the fall to. If I was to draw a graph showing rise of price of tomatoes vs INR rates, believe me, there could be some sense in that too.
The most interesting thing about the article is it writes off the "effect" as the "cause". Its not that FII debt causes the rates to go down, its rather fear of future rates that causes people to take out money. Yes, it causes the rates to dump further, and then more FII is pulled out but FII is not the reason, fear of future rates is.

And then the author says, when the US started making announcements on reversing the regime of low interest rates, FII started to flow in the opposite direction. Seriously?! The announcement of ending QE by Fed(or low interest rates for sake of simplicity), came in June. The first ever announcement of this was done during Beard Ben's senate testimony in May. The FII flow started even before that - evident from the chart author put up. So what was the precursor for it? Certainly not lower interest rates.
IMO, the article might provide some perspective on things but lack details. Just my two cents.
 
The problem is even if NDA comes up in the next run, more than half of their term would pass cleaning up the mess of UPA. Then again the same thing would happen, like what happened during the Vajpayee govt. The Vajpayee govt did not get elected in the next term, instead UPA enjoyed all the fruits of NDA govt's hard work.

Also RBI governer seems to be blaming ManMohan Govt for the downfall. MMS was blaming external factors. :P

http://www.financialexpress.com/new...for-mess-indian-rupee-economy-is-in/1161911/1
 
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sharktale1212 said:
If I was to draw a graph showing rise of price of tomatoes vs INR rates, believe me, there could be some sense in that too.
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Please do. Since we grow them locally and their price is set by supply & demand , i'd like to see what the correlation is.

sharktale1212 said:
The most interesting thing about the article is it writes off the "effect" as the "cause". Its not that FII debt causes the rates to go down, its rather fear of future rates that causes people to take out money. Yes, it causes the rates to dump further, and then more FII is pulled out but FII is not the reason, fear of future rates is.

And then the author says, when the US started making announcements on reversing the regime of low interest rates, FII started to flow in the opposite direction. Seriously?! The announcement of ending QE by Fed(or low interest rates for sake of simplicity), came in June. The first ever announcement of this was done during Beard Ben's senate testimony in May. The FII flow started even before that - evident from the chart author put up. So what was the precursor for it? Certainly not lower interest rates.
IMO, the article might provide some perspective on things but lack details. Just my two cents.
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Fear of future rates or anticipation of better rates elsewhere ?

I thought that article was very good in explaining the causes in a non-partisan manner.

Could we do better that is where fiscal policy comes in. if you want to slam the incumbent then blame them for not doing better not for the current predicament.

The best thing is we still have our own currency that can fluctuate, vice economically weaker countries in the EU that have to stick to the euro, which is more painful.
 
blr_p said:
Please do. Since we grow them locally and their price is set by supply & demand , i'd like to see what the correlation is.
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:)
That was figurative speech.
The reason I said it because if we look at deficit figures, you will find it has been increasing for most years - the government spends more than they collect in tax. That doesn't mean causation.
blr_p said:
Fear of future rates or anticipation of better rates elsewhere ?

I thought that article was very good in explaining the causes in a non-partisan manner.

Could we do better that is where fiscal policy comes in. if you want to slam the incumbent then blame them for not doing better not for the current predicament.

The best thing is we still have our own currency that can fluctuate, vice economically weaker countries in the EU that have to stick to the euro, which is more painful.
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Fear of future rates --- the concept of "hot money" explained in the blog is actually called "carry trade" in forex parlance. People use low interest rate currencies to fund investment in high interest baring currencies. The driver is called interest rate differential (IRD). This pays in terms of borrowing 100k USD at say 0.1% and then investing in India which returns 4.00 % (assuming saving accounts interest rate). This money is further used to invest in local market - BSE. With more and more people entering the fray, it becomes a cycle - rates and the local market climbs - more people enter - and then market climbs again.
But say, there is an anticipation of interest regime getting over, the carry trade unwound. As the trade unwound, rates will rise, anticipation of this rise (fear of future rates) will cause people to pull out and return money to their own country.
Better rates figure when they find another economies to invest in, restarting the carry trade cycle -- and nowadays no one is doing good. This is just fear (risk off) and not better rates (risk on).
The article misses on many points. ex. the actual flow started back in Jan (though the article represents April) when the US GDP outpg ut crossed the pre-2008 peak. Since then it has been matter of time when Fed was going to announce the rolling back of QE. With some better data - employment, GDP etc coming out good for 4-5 months, they officially said it in May.
Another issue, article says exports will be better cause now it can be sold for lower. But actually exports do forward transaction based on what the spot rates could be in the future. These forwards can start from 6 months to 2-3yrs. So people who bought it are committed to the fixed price -- they are not going to lower price to 85 cents (until we are talking small time manufacturers). I mean, it sounds good while explaining layman but its so off. OR did the author mean in the future - 6to 2-3yrs down the lane?
*enough of rant for today* :)
 
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very good, so i guess we will wait for your reply tomorrow then. Give us YOUR take on why the rupee has devalued. Don't be afraid to be verbose, this is not a good thread for those with ADD.

You agree that hot money is an effect. Doubtless there are more causes.

sharktale1212 said:
Actually what is happening now is even bigger scam and sheer scale puts 'American Housing Bubble' to shame. This whole slide is just the tip of the iceberg. It might be sometime when the actual thing really happens. When it hits it will be hyperinflation and contraction both at the same time. Think Japan in the 90s but multiplied by 10
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Nobody took this vague gem on which comes with a number of qualifiers (underlined). Reads like a worst of worst prognosis. Just needs some scary music (Theme of the movie 'Jaws') to accompany it :D

Bigger than the 'american housing bubble'. For whom & where
 
blr_p said:
very good, so i guess we will wait for your reply tomorrow then. Give us YOUR take on why the rupee has devalued. Don't be afraid to be verbose, this is not a good thread for those with ADD.

You agree that hot money is an effect. Doubtless there are more causes.
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Sitting here with my feet in warm salt water, so why not some more rants :p
I gave my take long ago in a thread, back in 2012. I thought India's inflation was cause of concern. Simplest explanation I could give was reduced coin sizes. People still think I am crazy (specially the MBA ones) to actually say it. If you dig up my posts (which I guess you actually did from the quote ;) ), I have been shorting INR since July 2011 based on just that.
blr_p said:
Nobody took this vague gem on which comes with a number of qualifiers (underlined). Reads like a worst of worst prognosis. Just needs some scary music (Theme of the movie 'Jaws') to accompany it :D

Bigger than the 'american housing bubble'. For whom & where
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The only reason I can think of is that people dint think it was vague. @kippu even liked it so I thought he understood it well :D
Still whom: this QE and artificial inflation creation by Beard Ben (google the term Bernake put) & where: the country of "housing bubble" itself. As Japan has proved QE/near zero interest, free money used to kickstart economy and inflation, goes out into the world and is not restrictive to the country. Now with US and Europe joining them, most of the developed economy have access to free money. They pump it into the developing economy in hopes of getting superior returns. This causes easy access to liquidity in developing economies = inflation in these economies too. When the time comes and there is an iota of inflation/recovery in US/Europe, they will say end the QE and the money will flow back to the originating country. Once the money starts flowing back, it will leave the developing country with inflation and in deficit and tanking market (does it sound like something similar is happening now? ). Now as the recovery in those countries was not really a true recovery, central banks will say sorry, more QE again. And the circle will repeat. This will continue until there is a time when Fed/ECB cant service their debts (ie printed money) anymore. With inflation already setting in, and lack of access to liquidity, the economies will start slumping. Governments will be forced to either raise taxes or go on austerity further pushing the economy.
If you want to know more, read about current stats in Greece. Or read about economy aftermath of World War I in Weimar Republic (old Germany). Or about the Argentian Keyenes experiment.
And I am not putting any timer on it. Might take years or decade to actually unfold.
 
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sharktale1212 said:
Sitting here with my feet in warm salt water, so why not some more rants :p
I gave my take long ago in a thread, back in 2012. I thought India's inflation was cause of concern. Simplest explanation I could give was reduced coin sizes. People still think I am crazy (specially the MBA ones) to actually say it. If you dig up my posts (which I guess you actually did from the quote ;) ), I have been shorting INR since July 2011 based on just that.
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If those MBA types gave reasons why they think you are crazy then i would take them seriously and know they deserved to have such a title. Your explanation is very simple and accessible to a layperson. I see nothing crazy about it at all.

Now, if a country decides to make lighter coinage, the question is to what extent are they phasing out the older coins completely. Take those thick 5 rupee coins, still in circulation even though a much lighter 5 rupee coin moves about nowadays. Not as common but out there.

Now I'm not aware of countries issuing heavier coins, if they move to lighter ones then that means its here to stay. So does this mean we get used to Rs.60-70 or more to the dollar for the long term or not ? That really is the bottom line.

sharktale1212 said:
The only reason I can think of is that people dint think it was vague. @kippu even liked it so I thought he understood it well :D
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if people do not respond to a point on an open forum it means
- they did not understand it or they did not know what to say
- they agreed
- they disagreed but could not be bothered to respond

Can't tell what the split is. Invariably a response is better than not. More is better.

sharktale1212 said:
Still whom: this QE and artificial inflation creation by Beard Ben (google the term Bernake put) & where: the country of "housing bubble" itself. As Japan has proved QE/near zero interest, free money used to kickstart economy and inflation, goes out into the world and is not restrictive to the country. Now with US and Europe joining them, most of the developed economy have access to free money. They pump it into the developing economy in hopes of getting superior returns. This causes easy access to liquidity in developing economies = inflation in these economies too. When the time comes and there is an iota of inflation/recovery in US/Europe, they will say end the QE and the money will flow back to the originating country. Once the money starts flowing back, it will leave the developing country with inflation and in deficit and tanking market (does it sound like something similar is happening now? ). Now as the recovery in those countries was not really a true recovery, central banks will say sorry, more QE again. And the circle will repeat. This will continue until there is a time when Fed/ECB cant service their debts (ie printed money) anymore. With inflation already setting in, and lack of access to liquidity, the economies will start slumping. Governments will be forced to either raise taxes or go on austerity further pushing the economy.
If you want to know more, read about current stats in Greece. Or read about economy aftermath of World War I in Weimar Republic (old Germany). Or about the Argentian Keyenes experiment.
And I am not putting any timer on it. Might take years or decade to actually unfold.
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I'm aware of the general economic history you refer to, QE, Bernanke, Greece, weimar republic etc.

What was unclear was whether you were referring to the US or India. It seems you are referring to the US/ECB. After 2008, i've been in lots of discussion with people that thought the sky was going to fall either tomorrow, next week, month or year. Guess what it didn't and we did not see some world war. So i get sceptical over these sorts of predictions. The doom & gloom stories have as much a chance (probably less) of happening as not.

In your answer you say that its the hot money that comes in = GDP growth with inflation and when it leaves it causes depreciation. Cyclical. Therefore you agree with the basic premise of the scrips article. What more can you add ?

i don't think we will have a 1997 south east asia crisis because the rupee is not fully convertible.

re: whether US/EUcan service their debts or not depends on how they manage their economies. They know enough not to repeat japan's example. I think there is more chance of seeing higher taxes & austerity than hyperinflation. So i don't think they will end up like Japan. The US effectively has little under 10 years to get its house in order before it gets into trouble.

If they go bankrupt then their country is up for sale to others that will come in restructure things on strict conditions for any loans. Happens all the time in loads of countries and will continue to do so. India in 1991 is a perfect example of just this. Down to 47 tons of gold that had to be pawned to the bank of England. India imported over 800 tons of gold just last year. What a difference twenty years makes. So the lesson is if you want change in India, then hope for a crisis because that is the only time when it can be done with reduced opposition as there is no other choice. Remember Iceland ? how are they doing now, are they better off than the PIGS in the EU. A fluctuating or depreciating currency automatically acts as a control and moderates behaviour. A strong currency poses problems of its own as well. The 'right' value is difficult to maintain.

At this point in time i wonder how long will it be until the rating agencies downgrade us to junk status. How bad will it be if they do. It means borrowing money from abroad becomes more expensive so the present govt has to do whatever it takes to prevent that from happening. You know its funny, change, liberalisation etc is all down to external factors. It was the IMF plan that got this country off its bottom in 1991 and leadership of that era had no other choice but to comply.
 
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america just shifted the goalposts to show that their GDP is growing , they changed the way they calculate the numbers :D
 
Well the FOMC rolled back the tapering as I said they would. Markets closed on a 31 mth high. They could have gone either way but there was an 70-80% probablity they wont. I mean who doesn't like free money.
@blr_p I had typed out a long reply to your post, forgot to post it. Most probably, cause it was gonna be last reply from my side. @swatkats - bumped this and reminded me.

do we get used to 60-70 rates in long term (and I mean when the QE stops bankrolling in)? . Most probably. Again there is no way to know what implications will it have for the USD itself. So it might even go either way. We have to wait and see.

If you are aware of history, then you must know the saying - History always repeats itself. And I am referring to everyone, we all are worse off from the QE. If free money confined to US/Europe will hurt only them. Globalization has made sure no one is spared - including India (and no, I am not against globalisation. My rozi roti today is due to a globalization trend of outsourcing).

You know there were many people who started talking about housing bubble back in 2006-07 - Peter Schiff is one example. Look him up on YT, he was literally laughed off the sets on CNBC - there are quiet a number of videos "Schiff was right". And there were those who started way back in 2003-04, people dont even remember them (I personally know one guy - he is called Merlin at a forum called forexfactory). So yes, the bubble dint burst until 2008, doesnt mean he was wrong, just dint happen soon enough. There is a saying "Markets can remain irrational a lot longer than you and I can remain solvent". So all the guys giving you the doom and gloom might just be delayed.(I hope none of the doom and gloom had to do with 2012 :p)

re Europe and US, if they had learned a lesson from Japan we wouldn't be here. Japan's problem emanated from excess. If there was lesson there wouldn't be any housing bubble or 2008 crisis. And please dont mistake Japan's issue as deflationary economy - oh, there is plenty of inflation already: http://www.ft.com/intl/cms/s/0/0ac0229c-a830-11e2-8e5d-00144feabdc0.html#axzz2QifnXkC8
What is not there is a way to put the economy back into the excess frenzy mode. Considering US is again raising their debt ceiling - for like the third time. If those are signs of learning, then I can hardly imagine - what signs would have been of not learning.

That said, I really like the way you casually yeah so country is on sale, lets restructure - US restructuring would have far reaching consequences, the world currency and all? The CDS on US securities, the billions of petrodollars and eurodollars, the US denominated trillion dollar derivatives market - all will loose value, real fast.
And for European countries - well we all saw how great Cyprus' restructure worked out - taking private citizen money after advertising as tax havens for years. And how well Greece's restructure worked - it wasn't until the actual "austerity" started that they stopped giving free holidays just for showing up for work (yeah thats a thing). *added later* and in the latest round of "austerity" they have removed extra free holidays for employees using computers - took three rounds of restructuring to get there. All I can say is wow, if that is the kind of restructuring and austerity we are talking about, its really amazing* Comparing Iceland to PIIGS is like saying kettle is blacker than the pot (couldn't come up with better "comparing with the worst and saying it is good" example :) )

And I agree with you, about the external factors. They play a big role in a developing country.

All said, I don't understand why you keep asking "What more can you add ?". I have already given at least three issues/my additions to the articles, if you cared to read this post carefully:
http://www.techenclave.com/communit...d-in-the-fx-market.151921/page-3#post-1865552
Let me rephrase them for clear understanding:
1. Its backward looking. Why dont you ask the author about the 60-70 band and see if he/she can put a timer and explain it too? (I added by letting you know my distrust of the Fed and them stopping free money printing)
2. Uses a cherry picked timeframe of April 2013 - when the INR outflow has been happening before that. What caused the change in trend from the 40s towards the 50s? (I added by giving my interpretations on rising inflation in India)
3. Gives a bollocks explanation about "cheaper exports" - has never heard of currency swaps? (I added by explaining how the exporters work by buying forwards/swaps and commit to a fixed price in the future)
So please stop glossing over yeah so hot money, what more? There is nothing more I can add if you just skip over and repeat the same question.

Lastly, I have given all my views on this fx thing. Take them with a pinch of salt, I am just a humble IT engineer with no formal training in finance/international business. I could be wrong about most things.
 
Asian markets rebound as Fed delays tapering stimulus

A wave of relief swept across Asia, Europe and Africa after the US Federal Reserve decided to maintain its pace of monetary stimulus, as investors and governments concluded that the financial environment for emerging markets would be less harsh than expected in coming months.

We've got ourselves a respite till Dec :)
 
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