Hold those dollars

Rupee has been steadily appreciating against the US dollar...Almost 10% up in the last few months..The increase is high enough to raise some alarm bells in the Finance Ministry. As has happened in the past, RBI might intervene soon and mop up a few dollars from the market making them pricier. It can build up it's dollar reserves (already over 100 billion) and maybe use it payoff some it's loans? Apparently, money in Reserves fetch just a meagre 2% return (I do much better :)) and our loans eat up 5% interest.

An increasing rupee makes things all the more costlier to companies outsourcing work to India. With salaries rising (growth best in Asia), infrastructure costs rising and the Dollar falling, India will no longer be a "preferred" offshore destination if the dollar languishes at it's current level against the rupee. So, RBI will come in and bring a little more sanity to our more than by 9.2 percent overvalued rupee (JP Morgan Chase statistic). So, hold that dollar in your pocket. Sending dollars home at the wrong time is as bad a decision as say putting all your money in a saving account (some have it in checking!!). I have been guilty of both and have just learnt it the hard way !!

Want to know more about rupee dynamics..take a look at the sites below

http://timesofindia.indiatimes.com/NEWS/India_Business/Rupee_in_sight_of_fresh_one_year_high/articleshow/1571722.cms
http://www.swaminomics.org/et_articles/et20031001_currencyappreciation.htm