Exchange rates and exchange bureau at Indian airport

anesa

That's fair enough, Tim. In some countries exchanging at the airport can be really really bad but that's not necessarily the impression I get from India.

I will look at the money exchange counter situation/ATMs at Chennai airport and see how it goes. Thanks also to Nick for your reply.

BenV

Thanks for the many replies!

The Euro - INR has shown some incredible changes:
http://www.x-rates.com/d/INR/EUR/graph120.html
Note that the last 120 days, there has been a rise of 100*(59.8 - 52.5) / 52.5 = 14%. I just considered buying some INR now, in case it starts to drop; 14% is quite a fair amount considering the expenses of our whole holiday (and my boss is not that generous, so every 1% is 1 ).

From what I gather, our local exchange agency is far below the mid-range rate and also below what exchange agency at the Gandhi airport offer (some (53-58)/58 = -9%).
So, as long as the exchange rate there, at our time of arrival is higher than that of what is offered us here now, we are better off buying there and then. Thus the overal mid-range rate might even drop 9% before we have to start to regret not having bought some INRs here, now

Hopefully the monsoon is no too good, otherwise the INR will gain power

Karan321

Most currencies have their exchange rate determined in reference to a basket of other currencies. In the case of rupee it is made in reference to the dollar. But it is not fixed against the dollar like the yuan was previously, rather the RBI has adopted a method of managed float which means that within a certain period the rupee will be allowed to vary between an upper and lower limit against the dollar. But if the rupee appreciates or depreciates beyond these limits based on market forces of demand and supply then the RBI will buy or sell dollars to keep the exchange rate within those limits. Broadly speaking the exhange rate with other currencies is made keeping the dollar in consideration or one can say that the dollar serves as a sort of conduit.

Nick-H

Ahh... this is not pegging; this is a country supporting its own currency, and I think most will do that, in so far as they can, for the sake of economic stability.

BenV, being involved at the moment in buying a house, you can imagine what changes in the exchange rate currently mean to me! So far I'm considering myself lucky, but every time I transfer money there is no knowing what the rate will be when it gets here. And if it goes even higher in the months to come, I may be revising the "luck"!

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Just one member of the IndiaMike Mod Team

Karan321

As a matter of fact it is pegging because the Rs. exchange rate vis a vis other currencies is not determined by market forces or demand /supply in relation to that currency but is based on its exchange with the dollar. This means that when any currency appreciates or depreciates against the dollar it will follow the same trend with the rupee. Again with the dollar it is to some extent an artificially maintained exchange rate and not truly reflective of the current market situation.

For a currency to be pegged to another it need not be only with a fixed exchange rate. A managed float within a narrow band is also a pegged exchange rate. In both cases the currency does not represent its true market value.

Nick-H

OK, Karan. I won't argue... As you can probably tell I'm way out of my depth on these things!

You might be able to enlighten me on something else....

The Ruppee is not a convertable currency. It is not supposed to be taken outside of India. So how come there is a currency market in which rates are quoted against pound, dollar, etc etc.

Or is it rates at which those currencies are traded within India.

You see... I am a very confused person on these issues!

BenV

Nick, if you are buying a house, you should try to get your head around this exchange issue! It might save you a toolshed or spare room

capt_mahajan

this may be offtopic, in which case should be moved to the buying a house in chennai thread.. but is pertinent to exchange rates.

the exchange issue has beaten the so called experts in the last year. right now the same experts generally predict a lower exchange rate within the next six months.. figures of 45.50 to the dollar being bandied about end 2006.

factors pushing up the dollar or pound or euro vs rupee: crude prices, foreign direct investment, level of foreign investment in stockmarket presently low, and of course the import/export scenario. plus internationally the dollar is stronger right now, given the tension in the middle east.

factors pushing down the dollar: growth of indian economy, foreign direct investment expected to increase, level of foreign investment in stockmarket expected to increase. and that the dollar is expected to weaken long term, given the huge US deficit.

crude oil prices have a big impact, as india has always been a huge importer, and this is unlikely to slow down in a growing economy.

I think Nick will be more affected by where the property prices are going rather than the exchange rate, which is unlikely to vary more than 3-5% from current levels in the next year. once i have made a decision to buy now, i wouldnt try to time that, except be ready to move money at short notice to take advantage wherever i can.

Property prices, however, are at huge highs, and though i do not believe they will fall across the country everywhere, similar experts are predicting a drop over the next few months.. this drop has already occured in some cities, and stagnation in others.
As an example, bombay property prices in some areas fell by 40% or thereabouts in the early nineties, and took almost decade to recover to earlier levels.

what i would do is use the present slack property market to haggle like hell. we are talking about buying a property to live in and not investment, so this is a long term thing and will appreciate anyway, specially since nick seems to be looking at buying land with constructed property. land is a better bet anyway for appreciation long term.

but buying property is confusing at the best of times, without exchange rates thrown into the pot.

Nick-H

It's one of those things. We need a house now, so we're buying now; we're buying now so I have to bring the money here now...

But the difference from 75 to 85 on 100,000 GBP: 15 Lakh! So you can imagine I'm pretty pleased with the exchange rates at the moment.

My theory is in line with yours on property: just like in London about 15 yrs ago, prices rose quickly and then fell (and I bought at the top of that market too ).

My East-London-house value fell less than some. It is the posh areas where the prices get inflated the most and fall back the most. I'm relying on the same here: we are buying out of town, on the "wrong" (not sea-) side of the East Coast Road. So I expect a short-term "loss". If my theory is correct, we'll be back looking in Central Chennai, at least for investment, if not living, at the coming lower prices. If not, well, we'll be sitting in our nice garden enjoying the trees, birds, etc

I think the media has a lot to answer for. The local press has been full of Property market Boom articles. People selling read this stuff and immediately up their price. One seller whose house I saw put (against the broker's advice) his price up by 25% from one day to the next.

Now the last article I read said that investors are not buying, devlopers have thousands of unsold flats on their hands: only people who need property now are buying now. (and the wealthy NRIs are probably still buying their sea-view Besant Nagar houses because they don't care what the price is...)

But I do my budgeting at a lower exchange rate than today's --- just in case. One day is a long time in Foreign Exchange!

capt_mahajan

besides media, a big factor in the boom is young people in india getting housing loans real easy, at affordable instalments. and many dont have the experience or the maturity to invest. like you say, buying for living is a different issue. i doubt whether you are going to lose long term. quite the contrary.

however, even though housing loans rates were much higher, i remember, 15 years ago, friends of mine in bombay cursing because they were paying high instalments on depreciating property.

as long as property is going up nobody bothers about the interest. when it falls, however...

the exchange rate? good for you. and good luck.

Nick-H

Thanks ...and yes, same situation in London 15 years ago. Nobody cared about the interest rates because values were ring daily. Then then media was suddenly full of negative equity and repossesion.

Interest rates are rising here now, partly as a general inflation curb, and partly to try and cool down the property market.

Funnily enough, I'm paying about teh same for this house as I paid for my London house 15 years back. It's nice not to have to be borrowing this time!

BenV

Good info, capt_mahajan, you seem to know a lot more of this than I do.

Nick generally faces two issues:
1. Property price - As has been said this is perhaps more volatile at the moment. The prices are likely to rise and -I guess- also on the long-term due to the growth in the Indian economy. Nick should best send his wife or Indian friend if he is still interested in bargains (if they see his Western face, the owner smells money). Otherwise I would recommend him to buy land and build his own house. Labor is cheap, resources are OK and his house will be low maintenance the years ahead and still interesting to sell in 10 years. House and ground prices are on the rise, also on the longer term in India.

2. Nick is not interested in the USD - INR, but rather GBP -> INR. This certainly is more volatile than suffering a mild 3-5% range because of the pegging. The exchange rates are so good at the moment, I think he would not be stupid if he'd move some of his money now.

Agree, capt_mahajan?

capt_mahajan

i am afraid i dont know too much about the pound rupee exchange rate predictions. what you say makes sense though, even if one tends to feel cheated if the exchange rate goes up subsequently after buying!

Karan321

Nick, the issue of convertibility should not be confused with taking the rupee out of india in its physical form.

When I convert my rupees into dollars for a trip abroad, I am in effect taking rupees out of the country in a currency that is universally accepted just not in its physical form. Whatever restrictions exist on taking the rupee in its physical form outside India would have more to do with the purpose for which it is or may be used and RBI may want control over that. Since whenever we purchase foriegn exchange in India we have to fill a form A2 where we have to furnish the reason for this requirement.

Coming to the issue of convertibility, rupee as a matter of fact is convertible, but not fully convertible.
Which means it is convertible on current account and trade account but not on capital account.
Current account means that i can change my rs into dollars to travel overseas for leisure, business, education etc. and you can change pounds to Rs. to come to India for the same purpose.
Trade account means that i can convert Rs. to dollars, pounds etc. to pay for goods i am importing into india and vice versa.
In the case of Capital account, there are restrictions on me investing in assets, stocks abroad and the same holds true if you want to invest in India with foriegn currency. Many of these restrictions have been eased in the recent past but permission still has to be taken from the RBI.

BenV

capt_mahajan:
Obviously, but as it is high nonetheless you would still have a favorable exchange and you are covering risk of sudden drops. If he'd only had some more insight in what is determining the current growth, he'd be able to get some insight in developments in the foreseeable future!

Karan321:
W.r.t. the trade account, I'd expect the Indian government to prevent importing (to stimulate local economic activity), but support foreign direct investments (to stimulate the influx of economic value)?