Market Update
Forex
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
August 04, 2012

The US Dollar dropped against all its major counterparts with the exception of the
Japanese yen.
Euro rallied by 200 pips against both safe havens and high yielding counterparts.
The Sterling closed this past week weaker against all its counterparts with focus on Bank
of England’s inflation report on Wednesday.
Gold advanced from multi month congestion but lost the bullish impetus towards the last
two days of the week.
USD/INR slipped below 55.50 in first part of the week but later spot moved above 56.00 to
touch 56.20 highs on Friday, before late EUR bounce sent the pair below 55.90.
The range for the week 55.07-56.21.
Macro Indicators:
Markets Trends
Indicators
Prev. Period Value
Current period
GDP %
6.1(31/12/11)
5.3(31.03.12)
IIP %
-0.9(31/03/12)
2.4(31/05/12)
Fiscal Deficit (Rs. Crore)
74391(31/5/12)
48873(30/6/12)
M3 Growth (%)
13.20(29/06/12)
14.3(13/07/2012)
287.339(20/7/2012)
288.650(27/7/2012)
Inflation (%)
7.55(May 2012)
7.25(June 2012)
Credit Deposit Ratio (%)
76.67(25/05/12)
76.43(29/06/12)
6229170(29/06/12)
6221750(13/07/2012)
Forex Reserves (USD bn)
Aggregate Deposits (Rs. Crore)
06/11
Key International Indices and Commodities:
Exchange Rates:
Major pairs
EUR USD
GBP USD
27.07.12
1.2320/23
1.5746/51
1.2385/87
1.5638/40
USD JPY
78.41/44
USDINR
55.3325/35
55.74/75
GBPINR
87.13/15
87.16/19
JPYINR
70.54/57
71.03/.06
EURINR
68.17/19
Index
03.08.2012
78.45/47
69.03/.05
DOW JONES 1.3343/45
13075.66
03.08.2012
16.03.12
09.03.12
1.3173/76
13096.17
1.3122/25
1.6008/12
2985.09
1.5843/47
2967.90
1.5671/7327
SENSEX
82.82/84
16839.19
83.42/45
17197.93
82.44/48
NIFTY
5099.85
50.88/89
5627.21
81.44/48
8566.64
62.47/48
1622.9
67.89/91
90.13
5215.70
50.18/19
5787.28
79.50/53
8555.11
60.13/16
1603.48
66.10/13
91.40
NASDAQ
FTSE
NIKKEI
GOLD
OIL
1
27.07.12
30.03.12
49.84/85
78.10/13
60.43/47
65.40/43
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Forex
Market Update
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
August 04, 2012
Market Developments
Global Outlook
*
The US Dollar dropped against all its major counterparts with the exception of the
Japanese yen and racked up a sizable 1.7 percent drop against the Euro. The responsibility
for this move can be split between the drive following the Non Farm Payrolls release and the
general buoyancy in risk appetite trends (itself bolstered by the jobs data). The labor statistics
were superficially encouraging with a 163,000-job reading that represented the first betterthan-expected reading in five months. Yet, the uptick in unemployment brings us back to
reality when it comes to the underlying trend for economic activity. The next phase for the
USD will fall to underlying risk trends. With the S&P 500 at three-month highs and the Dollar
Index on the verge of breaking a year-long bull trend, a volatile anti-dollar push is likely.
*
The Euro 200-plus pip rally against US Dollar was the second biggest for the
benchmark pair in nine months .The markets will be brimming with optimism in the coming
week that the shared currency can shrug off the constant fear surrounding the region’s
financial troubles and carry out a hearty reversal against both safe havens (EURUSD) and
high-yield counterparts (EURAUD) alike. However, the Euro’s performance through this past
week should instill a sense of skepticism in the fundamental trader. It was the previous week’s
exuberant hope that ECB President Mario Draghi was prepared to lead the central bank to a
rescue independent of EZ bureaucracy that started the currency’s turn but he didn’t deliver at
the policy decision.
*
The Sterling closed this past week weaker against all its counterparts. The greatest
threat to the UK economy and financial system is the debt crisis in the Euro Zone. That is the
warning that policy officials have repeated on a regular basis, and it was an important factor in
the NIESR’s forecast for a 0.5 percent contraction in GDP through 2012 along with their
projection that Osborne will miss the budget deficit target for the fiscal year. That said, the
euro seemed particularly optimistic through the end of this past week, lifting a considerable
weight from the sterling’s shoulders. Risk appetite trends and the Euro situation certainly
factor in; but even when they are lifted, the sterling must still deal with its lackluster domestic
trajectory. That said, the market will be looking forward to Bank of England’s Inflation Report
on Wednesday
*
As remarkable as Gold’s advance and break from multi-month congestion a week
ago, the precious metal completely lost its bullish impetus through the final 48 hours of trading
this past active trading period. The safe haven aspect of the commodity didn’t pan out through
the slide or rise in speculative interests, so it is unlikely to have little bearing moving forward.
The anti-dollar factor on the other hand will play an important role on bearing. Considering the
Fed has offered no prospect for QE3 and Draghi has said the SMP activation depends on
EFSF purchases, the anti-fiat aspect will struggle. Meanwhile the CBOE’s Gold Volatility Index
plunged this past week from 20 percent to a three-month low 16.7 percent
Source: www.dailyfx.com
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Forex
Market Update
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
DOMESTIC OUTLOOK
August 04, 2012
*
USD/INR slipped below 55.50 in first part of the week as dollar remained on the back
foot ahead of the Fed meet. Late month oilers and importers' bids however bought into
intraday trades and provided a supported bias to the pair. ECB letdown however saw spot
punch back above 56.00 to touch 56.20 highs on Friday, before late EUR bounce sent the pair
below 55.90.
*
The Indian meteorological department confirmed late Thursday that deficient rains will
lead to a drought this year. Jun-Sep rains thereby will be 85% of the long-term average;
between Jun-Aug monsoon was 19% below the average (vs 23% in 2009). The department
official opined that production of coarse cereals and peanuts will be affected, with little impact
on paddy and lentils expected. Weak rains could bear a multi-fold impact - inflation and growth
at the first order, with secondary impact also on power generation, under ground water levels,
drinking water availability and further burden on the government finances on additional
subsidies.
*
The range for the week 55.07-56.21.
Source: 4castweb
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Forex
Market Update
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
August 04, 2012
First Quarter Review of Monetary Policy 2012-13 by Reserve Bank of India
The Reserve Bank of India (RBI) on July 31, 2012 at its First Quarter Review of Monetary Policy
Statement 2012-13 maintained status quo on its key lending rates, keeping them unchanged, as it
chooses to rein in inflation over growth. However, the apex bank has cut Statutory Lending Ratio
(SLR) to 23% from 24% earlier. The RBI has reduced the SLR of scheduled commercial banks to
23% from 24% of their net demand and time liabilities (NDTL) with effect from the fortnight
beginning August 11, 2012, the bank said.
On the basis of an assessment of the current macroeconomic situation, the RBI has decided to keep
the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8%. The CRR of
scheduled banks has been left unchanged at 4.75% of their NDTL. Consequently, the reverse repo
rate under the LAF will remain unchanged at 7%, and the marginal standing facility (MSF) rate and
the Bank Rate at 9%.
Since the Monetary Policy Statement for 2012-13 in April 2012, macroeconomic conditions have
deteriorated, the central bank said in a statement. Upside risks to inflation have increased as the
first two months of the crucial four-month long monsoon season have been deficient in rainfall.
This is making it difficult for the RBI to take any action. While India’s headline inflation stood at
7.3% in June, food inflation, which is at more risk due to the deficient rains, was 10.8% in June.
The deficient and uneven monsoon performance so far will have an adverse impact on food
inflation, the RBI said. Although the headline inflation did cool in June, it is still above the RBI’s
comfort level of 5%. Against this backdrop of heightened global uncertainty and domestic
macroeconomic pressures, the challenge for monetary policy is to maintain its priority of
containing inflation and lowering inflation expectations, the RBI said in a statement. The central
bank has also raised its FY13 inflation forecast to 7% from 6.5% earlier.
The RBI has changed FY13 GDP forecast to 6.5% from 7.3%. Reflecting the lagged impact of
weak industrial activity and global slowdown, the services sector growth is also expected to slow
down, the RBI said.
In April, the RBI had cut key interest rates by 50 basis points as inflation seemed to be getting into
control and the country’s growth was badly hit. However, at that time, the RBI had clearly stated
that any further rate cut would entirely depend on inflation rate. As the multiple constraints to
growth are addressed, the RBI will stand ready to act appropriately. Meanwhile, managing liquidity
within the comfort zone remains an objective and the Reserve Bank will respond to liquidity
pressures, including by way of Open Market Operations (OMOs), the central bank said.
The next RBI Mid-Quarter Review of Monetary Policy for 2012-13 is scheduled for September 17,
2012.
Source : Reserve Bank of India
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Forex
Market Update
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
August 04, 2012
Further Relaxations to Exchange Earners, Exporters and AD Category-I Banks
Reserve Bank of India has reviewed the extant guidelines governing Exchange Earner’s Foreign
Currency (EEFC) Accounts, cancellation and rebooking of forward contracts booked by the
exporters and the Net Overnight Open Position Limit (NOOPL) of the Authorised Dealer
Category-I Banks. In order to provide operational flexibility to exchange earners/ exporters and AD
Category-I banks, it has been decided:



To restore the erstwhile stipulation of allowing credit of 100 percent foreign exchange
earnings to the EEFC accounts subject to the condition that the sum total of the accruals in
the account during a calendar month should be converted into Rupees on or before the last
day of the succeeding calendar month after adjusting for utilization of the balances for
approved purposes or forward commitments;
To allow exporters to cancel and rebook forward contracts to the extent of 25 percent of the
total contracts booked for hedging their exposure; and
For computation of Net Overnight Open Position involving Rupee as one of the currencies,
AD Category-I banks need not include the positions taken by their overseas branches and
also the delta of the Options Position. It is, however, clarified that these positions will
continue to be part of the total NOOPL along with cross-currency positions and positions
arising out of exchange traded currency futures/options transactions for calculation of the
total foreign currency exposure of banks.
Source: www.rbi.org.in/PressRelease/2012-2013/165
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Market Update
Forex
INTERNATIONAL DIVISION
VOLUME 08, NUMBER 1
August 04, 2012
CONTACTS
INTERNATIONAL DIVISION
INTEGRATED TREASURY
BRANCH

INTEREST RATE ON NRE, FCNR (B), RFC DEPOSITS
NRE TIME DEPOSIT RATE w.e.f. 01.05.2012
Time Buckets
K.A.SOMAYAJULU
CHIEF GENERAL MANAGER
K. ESWAR
GENERAL MANAGER
(TREASURY & I.D.)

RAMESH S. SINGH
DY. GENERAL MANAGER
(INTERNATIONAL DIVISION)

YOGESH RAI
DY. GENERAL MANAGER
(TREASURY)
G.BHASKAR
ASST. GENERAL MANAGER
(CHIEF DEALER)
FOR DAILY CARD RATES
VISIT OUR WEBSITE
www.centralbankofindia.co.in

Please mail your
Suggestions/Feedback
dgmtreasury@centralbank.co.in
rajendrahirve@centralbank.co.in
Address:
International Division
Central Bank of India
5th Floor, Chandermukhi
Nariman Point
Mumbai-400021
1 Year to less than 2
years
2 Years to less than
3 years
3 year to less than 5
Years
5 years and above
up
to 10 years (NEW
SLAB)
NRE Savings Bank
Single
DepositBelow
Rs.1Crore
Single
DepositRs.1
Crore to
Rs.10
Crore
Single
Deposit
Above
Rs.10
Crore
9.00
8.75
8.75
9.00
8.75
9.00
To be
decided
on daily
basis by
treasury
8.50
8.75
Remains unchanged at 4%
FCNR (B) Deposit Interest Rates % p.a. w.e.f.01/08/2012
Period of deposit
USD
GBP
EUR
CAD
AUD
1 year to less than 2 years
2 years to less than 3 years
3.05
3.49
2.90
4.05
6.55
2.42
2.80
2.60
3.36
5.22
3 years to less than 4 years
3.48
3.82
3.70
4.45
6.28
4 years to less than 5 years
3.63
3.92
3.86
4.54
6.47
5 years only
3.79
4.06
4.05
4.64
6.55
Overdue Deposit
2.05
2.49
1.90
3.05
5.55
RFC (USD) DEPOSIT Interest Rates w.e.f. 01/08/12
Period of USD deposit
6 months to less than 12 months & Savings
A/c.
Overdue deposits
% P.a.
1.05
NIL
**This information and analysis contained in this document come from the sources
believed to be reliable however, no representation or warranty, express or implied,
sell/purchase or an invitation/solicitation to do so for any currency, security, commodity
or equity. Central Bank of India accepts no liability whatsoever for any loss, however
arising, from any use of this document, its contents or otherwise arising in connection
therewith.
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