Indian rupee strongest against US dollar in 9 years, September 20, 2007 Options

[VAMAN]

Indian rupee breaks through 40 per dollar level for 1st time since 1998

The Associated Press
Published: September 20, 2007

NEW DELHI: The Indian rupee rose to a nine-year high against the U.S. dollar Thursday amid strong demand from foreign funds investing in one of the world's fastest growing economies.

The rupee rose 0.7 percent to 39.88 per dollar, breaching the psychologically crucial 40-per-dollar mark for the first time since May 1998.

The rupee has appreciated more than 10 percent against the dollar so far this year as global investors have flocked to India, where the economy is growing about 9 percent annually and the stock market has been climbing to record highs.

Analysts expect the rupee to remain strong through this quarter, although that could hurt exporters, especially the country's hugely profitable outsourcing industry.

"It will stay around 40 for some time," said Agam Gupta, head of foreign exchange trading at Standard Chartered Bank in India.

The rupee's strength has come despite measures by the Reserve Bank of India to counter a surge in foreign money into the country that also has fueled inflation. Last month, the central bank installed several curbs on overseas borrowing by Indian companies and ordered banks to hold more cash in reserves.

But Gupta said the central bank can do little to stem the flow of money from other sources.

"A lot of inflows have been in the form of foreign direct investment and investments in stocks and bonds," he said. "Those inflows will continue."

Foreign institutional investors have bought US$10.1 billion in Indian stocks and bonds so far this year, according to the Securities and Exchange Board of India. That money is on top of a record US$16 billion India received as foreign direct investment in the last fiscal year that ended March 2007.

The rupee got a boost after the U.S. Federal Reserve made a bigger-than-expected cut its key interest rate Tuesday, stoking expectations that investors will bring in more dollars to take advantage of higher interest rates here and a bull run in the stock market. The rupee gained about 1 percent against the U.S. dollar in Wednesday's trading.

India's benchmark interest rate is now 7.75 percent, 3 percentage points higher that the Fed's key rate, and it's unlikely that the Indian central bank will cut rate soon.

Market players will likely revise their projections for the rupee-dollar rate following the Fed move, Gupta said. Most foreign exchange traders earlier expected the rupee-dollar rate to average around 41 during the October-December quarter.

That is bad news for exporters, whose overseas earnings are eroded by the strong rupee.

Indian Commerce and Industry Minister Kamal Nath said the rupee's strength was "a cause for concern" and the government may have to revise the export target of US$160 billion set for the current fiscal year.

Trade data released earlier this month showed exports growth have already begun to decelerate.

"It is a new situation and requires a new response," Nath said, adding the government would explore measures to help exporters tide over the impact of a stronger rupee.

Source - http://www.iht.com

This post has been edited by VAMAN: Sep 22 2007, 03:59 PM

[dfl]

The American dollar is fcuked

[kkdkckrl]

This is not good news for India, since the IT and export industry is heavily reliant on US. Rupee is appreciating steadily because of falling dollar rather than a strong rupee.

[VAMAN]

This is not good news for India, since the IT and export industry is heavily reliant on US. Rupee is appreciating steadily because of falling dollar rather than a strong rupee.

Yes it will chew into IT companies' profits, especially small companies gonna hit hard. But big Indian IT companies have already foreseen these types of eventualities, so they have started applying new business models and strategies. I don't know if you are aware of these developments, it would be too cumbersome for me to explain you can read this article instead.

Outsourcing Works, So India Is Exporting Jobs

By ANAND GIRIDHARADAS
Published: September 25, 2007

MYSORE, India — Thousands of Indians report to Infosys Technologies’ campus here to learn the finer points of programming. Lately, though, packs of foreigners have been roaming the manicured lawns, too.

Many of them are recent American college graduates, and some have even turned down job offers from coveted employers like Google. Instead, they accepted a novel assignment from Infosys, the Indian technology giant: fly here for six months of training, then return home to work in the company’s American back offices.

India is outsourcing outsourcing.

One of the constants of the global economy has been companies moving their tasks — and jobs — to India. But rising wages and a stronger currency here, demands for workers who speak languages other than English, and competition from countries looking to emulate India’s success as a back office — including China, Morocco and Mexico — are challenging that model.

Many executives here acknowledge that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks around the globe. Or, as Ashok Vemuri, an Infosys senior vice president, put it, the future of outsourcing is “to take the work from any part of the world and do it in any part of the world.”

To fight on the shifting terrain, and to beat back emerging rivals, Indian companies are hiring workers and opening offices in developing countries themselves, before their clients do.

In May, Tata Consultancy Service, Infosys’s Indian rival, announced a new back office in Guadalajara, Mexico; Tata already has 5,000 workers in Brazil, Chile and Uruguay. Cognizant Technology Solutions, with most of its operations in India, has now opened back offices in Phoenix and Shanghai.

Wipro, another Indian technology services company, has outsourcing offices in Canada, China, Portugal, Romania and Saudi Arabia, among other locations.

And last month, Wipro said it was opening a software development center in Atlanta that would hire 500 programmers in three years.

In a poetic reflection of outsourcing’s new face, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of American “states which are less developed.” (India’s per capita income is less than $1,000 a year.)

For its part, Infosys is building a whole archipelago of back offices — in Mexico, the Czech Republic, Thailand and China, as well as low-cost regions of the United States.

The company seeks to become a global matchmaker for outsourcing: any time a company wants work done somewhere else, even just down the street, Infosys wants to get the call.

It is a peculiar ambition for a company that symbolizes the flow of tasks from the West to India.

Most of Infosys’s 75,000 employees are Indians, in India. They account for most of the company’s $3.1 billion in sales in the year that ended March 31, from work for clients like Bank of America and Goldman Sachs.

“India continues to be the No. 1 location for outsourcing,” S. Gopalakrishnan, the company’s chief executive, said in a telephone interview.

And yet the company opened a Philippines office in August and, a month earlier, bought back offices in Thailand and Poland from Royal Philips Electronics, the Dutch company. In each outsourcing hub, local employees work with little help from Indian managers.

Infosys says its outsourcing experience in India has taught it to carve up a project, apportion each slice to suitable workers, double-check quality and then export a final, reassembled product to clients. The company argues it can clone its Indian back offices in other nations and groom Chinese, Mexican or Czech employees to be more productive than local outsourcing companies could make them.

“We have pioneered this movement of work,” Mr. Gopalakrishnan said. “These new countries don’t have experience and maturity in doing that, and that’s what we’re taking to these countries.”

Some analysts compare the strategy to Japanese penetration of auto manufacturing in the United States in the 1970s. Just as the Japanese learned to make cars in America without Japanese workers, Indian vendors are learning to outsource without Indians, said Dennis McGuire, chairman of TPI, a Texas-based outsourcing consultancy.

Though work that bypasses India remains a small part of the Infosys business, it is growing. The company can be highly secretive, but executives agreed to describe some of the new projects on the condition that clients not be identified.

In one project, an American bank wanted a computer system to handle a loan program for Hispanic customers. The system had to work in Spanish. It also had to take into account variables particular to Hispanic clients: many, for instance, remit money to families abroad, which can affect their bank balances. The bank thought a Mexican team would have the right language skills and grasp of cultural nuances.

But instead of going to a Mexican vendor, or to an American vendor with Mexican operations, the bank retained three dozen engineers at Infosys, which had recently opened shop in Monterrey, Mexico.

Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border.

In Europe, too, companies now hire Infosys to manage back offices in their own backyards. When an American manufacturer, for instance, needed a system to handle bills from multiple vendors supplying its factories in different European countries, it turned to the Indian company. The manufacturer’s different locations scan the invoices and send them to an office of Infosys, where each bill is passed to the right language team. The teams verify the orders and send the payment to the suppliers while logged in to the client’s computer system.

More than a dozen languages are spoken at the Infosys office, which is in Brno, Czech Republic.

The American program here in Mysore is meant to keep open that pipeline of diversity.

Most trainees here have no software knowledge. By teaching novices, Infosys saves money and hopes to attract workers who will turn down better-known companies for the chance to learn a new skill.

“It’s the equivalent of a bachelor’s in computer science in six months,” said Melissa Adams, a 22-year-old trainee. Ms. Adams graduated last spring from the University of Washington with a business degree, and rejected Google for Infosys.

And yet, even as outsourcing takes on new directions, old perceptions linger.

For instance, when Jeff Rand, a 23-year-old American trainee, told his grandmother he was moving to India to work as a software engineer for six months, “she said, ‘Maybe I’ll get to talk to you when I have a problem with my credit card.’ ”

Said Mr. Rand with a rueful chuckle, “It took me about two or three weeks to explain to my grandma that I was not going to be working in a call center.”

http://www.nytimes.com/2007/09/25/business/worldbusiness/25outsource.html?th&emc=th

[VAMAN]

Rupee ends at new 9-1/2-yr high of 39.49/50 against greenback

By PTI
Thursday October 4, 06:37 PM

Mumbai, Oct 4 (PTI) The rupee today ended at a new nine and half year high of 39.49/50 versus the greenback, stronger by 8.50 paise from previous close of 39.5750/5850 on the back of consistent portfolio inflows and in the absence of any major dollar demand as well as weak Asian stocks.

In continued volatile trade at the Interbank Foreign Exchange (forex) market, the local currency resumed marginally lower at 39.58/60 a dollar and later fluctuated in a range of 39.3550 and 39.6350 during the day.

Earlier, the rupee ruled around this levels, when it closed at 39.65 a dollar on April 14, 1998 and at 39.40 a dollar on April 8, 1998.

Influenced by stock market activity, the rupee moved widely during the day even as the Reserve Bank of India (RBI) made a feeble attempt to contain the rupee's surge by making dollar purchases in favour of exporters, forex dealers said.

Foreign Institutional Investors (FIIs), which have poured in more than USD 4 billion in equity since September 19, remained heavy buyers in shares and supported the rupee sentiment, commented a banker.

Source - http://in.news.yahoo.com/071004/20/6ljth.html