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Rupee breaches 64 against dollar for first time in 20 months

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BLACK-MONEY

The rupee breached the 64 per dollar mark to hit its lowest in 20 months on Thursday. It last traded around these levels in September, 2013.

At the day’s low, the rupee hit 64.25 per dollar, down 71 paise or over 1 per cent against Wednesday’s close of 63.54 per dollar. It is now on course to for a sixth straight day of fall.

Experts say sustained capital outflows in equities and bonds have pressured the rupee, which was the best-performing emerging market currency in 2014.

Foreign institutional investors have sold a total of around Rs 13,500 crore in the last 14 sessions (excluding the Sun Pharma-Daiichi deal). They have also been net sellers in the debt market too. FIIs seem to be pulling out money from India over tax notices demanding a Minimum Alternate Tax on capital gains made during previous years.

“I think the real reason is MAT, which has created a sort of fear in the minds of FIIs… The strangest part is the demand has been raised for last seven years, which has not made a good impression,” said currency expert AV Rajwade.

Increased demand for dollar from importers and banks also weighed on the rupee, forex dealers said.

Traders told Reuters that the uptick in non-deliverable forwards traded in Singapore was hitting sentiment for the rupee and prompting custodian banks to sell the currency. The one-month non-deliverable forex (NDF) was at 64.35/35 versus Wednesday’s close of 64.02.

Most emerging Asian currencies lost ground on Thursday as a global bond rout lifted government bond yields across the region.

As of 2:45 p.m., the rupee traded at 64.16 per dollar. The Sensex was down 205 points to 26,513, while the Nifty traded 72 points lower at 8,025.

(Agencies)

Dump the dollar, says Ecuadorian president

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Ecuador's President Rafael Correa has long opposed the use of the dollar. Photo: Reuters

Ecuador’s President Rafael Correa has long opposed the use of the dollar. Photo: Reuters

by teleSUR

President Rafael Correa says the U.S. dollar is the “exact opposite” of what Ecuador needs.

Ecuador’s use of the U.S. dollar is hurting the country’s economic growth, President Rafael Correa warned Monday.

“Dollarization was a bad decision,” Correa said.

The president said that in the face of low oil prices, Ecuador would benefit from control of its own currency.

Ecuador is the smallest member of OPEC. Under Correa, the Ecuadorean government has increasingly invested oil revenues in social services and economic development.

However, with oil prices slumping, Correa says Ecuador needs a flexible currency now more than ever. He argued that by using the dollar, Ecuador is “doing exactly the opposite of what (it) must do to address the looming scenario.”

“In these difficult times we will see just how important it is to have a national currency,” he added.

Ecuador adopted the U.S. dollar in 2000 after the value of its former currency nosedived in 1999.

Correa has long warned the continued use of the dollar is holding back the economy, once describing it as a “straight jacket.”

In July, Ecuadorean legislators approved a law paving the way for the use of a parallel electronic currency for domestic use.

Brazil, Uruguay move away from US dollar in trade

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Reuters/Andrew RC Marshall

Reuters/Andrew RC Marshall

by RT

Brazil and Uruguay have switched to settling bilateral trade with local currency to stimulate turnover, bypassing the US dollar.

Payments in the Brazilian real and Uruguayan peso started on Monday. The agreement was signed on November 2 by the head of Brazilian Central Bank Alexandro Tombini and his Uruguayan counterpart Alberto Grana. Both countries believe such a move would strengthen trade across Latin America.

“The agreement was the result of long negotiations between the countries belonging to Mercosur [the common market of South American countries – Ed.], as well as the global strategies of BRICS,” RIA quotes Carlos Francisco Teixeira da Silva, Professor of International Relations at the Federal University of Rio de Janeiro.

Silva says the measure is a “step forward” in Latin American monetary independence, and “the best opportunity for the countries of South America to get rid of the old mechanisms of economic regulations dictated by the United States.”

If the new mechanism proves to be successful, it can be further expanded to countries such as Paraguay, Bolivia, or Venezuela.

Alex Luis Ferreira, a doctor of economic sciences from the University of Sao Paulo, says “the Brazilian real is likely to be used as an exchange and reserve medium.”

In November President Vladimir Putin said Russia plans to leave the “dollar dictatorship” of the market and increase the use of the ruble and the yuan in trading with China. Settlements in yuan between China and Russia have increased 800 percent in annual terms between January and September 2014.

Russia, China and Latin American countries are not the only ones interested in ditching the US dollar. The Eurasian Economic Union (EEU) which also includes Belarus and Kazakhstan is planning to create a single market for financial services by 2025 which will simplify switching to dollar-free trading. Earlier this week the Russian State Duma proposed the creation of a single area for payment in national currencies. Such measures are expected to minimize Western influence on the economy of the EEU.

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