Exports To Lose Edge As Rupee Gains Against Dollar.

KOLKATA | KOCHI | AHMEDABAD: A strongerrupee will hit Indian exporters hard but will put importers in an advantageous position. Internationally , gold is expected to rally further which will pinch the pockets of Indian consumers in the ensuing festive season. Rubber prices will also move northwards and will eventually jack up tyre prices. The edible oil industry will be in a comfortable position as imports will be less expensive but export earnings of commodities such as spices, coffee, tea and rice will be less due to the weakening of dollar.

Exporters who have not hedged their currency risks will be affected more. Export markets for India, especially western economies, are passing through tough conditions, including debt-related crises. Exporters are already doing business on thin margins and now if the rupee becomes stronger their realisations will be hit. The rupee fell on Friday dragged by euro's slide as worries over euro zone debt resurfaced but the local unit managed to post a second consecutive month of gains as inflows stayed robust.

The rupee ended at 44.1850/1950 per dollar, 0.3% weaker than Thursday's close of 44.07/08, but on weekly basis the local currency rose 0.4%. Though a weakdollar will be just one of the factors pushing up gold prices in the international market, it will give little time for Indian jewellers to stock for the coming festival season, which starts by September, said Anand James, chief analyst of Geojit Comtrade. "A weak dollar is just a factor in the gold price hike. Primarily, it is the uncertainty in the US and Europe that is driving up the prices," he said. In the domestic market, this is the lean season for gold buying.

"The strong rupee could keep the prices in check. But once demand picks up for the marriage and festival season ahead, prices could harden. We expect the prices to touch $1,700 per ounce by Diwali ,'' said B Girirajan, president of All Kerala Gold andSilver Merchants Association. The rubber industry thinks the weak dollar will have a neutral effect for the time being. "Tyreexports will be hit and this will neutralise any advantage on rubber import. Also the hardening of other South East Asian currencies like Baht and Ringitt has led to strengthening of rubber prices in the global market," said Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association. A weak dollar is likely to make a marginal impact on iron ore exports .

"There will be less realisation as both logistics cost and export duty are in Indian rupee and not in dollars. Further, there is a dearth of orders but with the Karnataka government yet to remove the ban on iron exports we are losing business to other international players," saidFederation of Indian Mineral Industries vice president H Noor Ahmed. "Export realisation has gone down by nearly 9-10 % due to the rupee appreciation," he said, adding that the overseas market may not be lucrative if exporters can fetch a good price within the country. In the agri-commodity space, an impact of rupee appreciation is imminent.

Source : economictimes.indiatimes.com