‘Subra I need to make a US $ 1000 payment by November, should I do it now or later?’ – this was the 3rd forex related query. The earlier 2 were from parents talking about paying the fees of children studying abroad.
All were worried about the US $ hitting 70 or 75….and wanted to know whether to pay now or later.
At best, I can give them an irresponsible answer. The honest truth is I do not know. I also feel that nobody really knows the correct answer, not by a mile.
Indian government has reacted in panic. Flat TVs cannot be a part of the hand baggage, gold cannot be imported (what will you do with all the empty spaces in the bags?). Not to blame the Chinese directly but we cannot access our iron ore, bauxite, coal, ….and we have Jairam Ramesh thinking he is helping the world Environment. In 1991 we were worse off, sure, but we had a brilliant product called ‘software exports’ – this is now a dead horse.
Should the fair value of the $ be 60? 50? or 70? well I do not know, as I said earlier…..but remember as the Emerging Markets are struggling with a strong US $, tapering, and completely incompetent macro management do not expect to see any magic. It is not rare for a currency to spurt and then take rest for a while. Hopefully our Supreme Court will relent and we will start exporting iron ore, reduce gold imports, ….and improve.
However the equity portfolio of the FIIs is about US $ 200 billion. They sell about 5% and we will panic…our infra projects will go for a super toss. 2 of our good airports are owned by a company up shit creek. Our top 15 borrowers from PSU banks are in, well, not in good shape. Our NPAs are far greater than we want to believe…
So whatever the reason for your payment, your guess is as good as mine. 62-64 is not a bad rate….I do not see it fall to say 58 in a hurry, nor will it run away to 75 in a hurry. That is what I think.
Please appreciate I stare into a PC – not P Chidambaram….nor a tele prompter….
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