Get ready for 25% Dollar appreciation

[abhinavthakur137]

I wonder what the opinions of all the experts on this thread are now. USD to INR rate just hit 74 and doesn't seem to be slowing down.

[techynt]

Holy cow....I did not imagine back then the concept of needing good luck will be so big...

I am guessing Indian stocks in terms of USD must be down more than 20-30% since April 2017.

BTW, I had no clue that this was about to happen, otherwise I would have repatriated my own money much sooner than June 2018.

Its just a gut feeling that anybody who feels so bullish about a badly managed developing country needs a ton of good luck......since if the timing is right you may be able to make decent profits if not you will lose a lot.

Anybody who feels like they are better off converting their USD into INR and investing in India stock market. I have only two words for you "Good Luck"..

Lets come back and check this thread in 1-3 years.

[wd40]

I wonder what the opinions of all the experts on this thread are now. USD to INR rate just hit 74 and doesn't seem to be slowing down.

Still maintain it is mostly a USD problem and not an INR problem. If you compare most other currencies, INR hasn't fallen more. It is still inline and in overvalued zone on a REER basis.

The question is when your overvalued USD is going to come down.

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[techynt]

Its nobody's USD. And not sure anymore what is overvalued when it comes to currency, its impossible to value a currency.

Say for example, if the current administration is successful in reshoring even 20% of the manufacturing, that will translate to less import, less CAD, more positive for USD?

So the big question is what will make USD overvalued that people will start selling USD for other currencies. Will that be say, 1USD = 2 AUD, will that make it easier for me to live a good life in Australia, I doubt it, we can take any country as an example and we will realize that its very hard to encourage people to move from one currency to another, only traders are doing that, even that is complete speculation.

Now lets flip the equation, what if 1AUD=3USD, how many australians millionaires may decide to move to USA. My gut feeling is not many, yes there will be some migration since people can retire early if their asset value is in couple of millions.

Lets take another example, what if USDINR=150, someone with 1 million USD will be worth 15 crore, will that be enough to make him move to India, can he afford to get similar life style in India based on this amount, frankly I dont think so, with rupee at 150 , I can bet inflation in India will be 50% higher than current prices since most commodities including energy is imported.

So out of 15 crore, lets say 5 crore will get you a decent house in a good location (assuming housing does not go higher), balance 10 crore at 3% withdrawal should be enough to live a decent life, so yes, at USDINR at 150 will be a big motivator to push all the people in USA in limbo and without strong connection to move to India if their savings are higher than 500k. This will lead to about 200k people moving back to India, approx 750k each, that leads to 150 billion, maybe big enough to stablize further exchange rate but still less than the forex reserves of RBI.

Just my random ramblings, about trying to make sense about what makes a currency overvalued or undervalued.

Still maintain it is mostly a USD problem and not an INR problem. If you compare most other currencies, INR hasn't fallen more. It is still inline and in overvalued zone on a REER basis.

The question is when your overvalued USD is going to come down.

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[wd40]

In my opinion, currently, everything seems to be positive for the USD, is a very temporary thing. It seems all positives are playing out now and all negatives will come with a lag of 1 year or 2.

It is like suddenly you had the tax cut and tariffs applied. This is a big shock to the system, a positive shock in which you have reaped the rewards instantly, but the costs of it has to be paid in 1 or 2 years down the line.

It is like suddenly you took a big loan of 1m and you went and bought a house a big car. You suddenly look very rich and well to do. But then you need to pay off that loan and there is no revenue. You may have to sell the house and car.

I am 100% sure about this. By 2020, USD and S&P 500 will be reeling under the effects of tariffs, rate hikes, slowdown or outright recession and of course the enormous US debt load.

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[dbs]

Still maintain it is mostly a USD problem and not an INR problem. If you compare most other currencies, INR hasn't fallen more. It is still inline and in overvalued zone on a REER basis.

The question is when your overvalued USD is going to come down.

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Check INR v/v Pound sterling!!!!

[wd40]

Check INR v/v Pound sterling!!!!

It is still below 100. In 2013, it was above 100. Even 2016, GBP was higher than what it is now.

But GBP has its own issues, related to Brexit. So GBP has been very volatile.

INR is expected to depreciate about 5% every year it is perfectly normal considering the higher interest rate you get. But the fall is never linear. Every now and then you have sudden fall in INR and then some period of stability. So as soon as there is big fall in INR and it has become cheap, it is the wrong time to exit INR. Overall over the long term INR investments will definitely be more profitable.

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[techynt]

It is still below 100. In 2013, it was above 100. Even 2016, GBP was higher than what it is now.

But GBP has its own issues, related to Brexit. So GBP has been very volatile.

INR is expected to depreciate about 5% every year it is perfectly normal considering the higher interest rate you get. But the fall is never linear. Every now and then you have sudden fall in INR and then some period of stability. So as soon as there is big fall in INR and it has become cheap, it is the wrong time to exit INR. Overall over the long term INR investments will definitely be more profitable.

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what investments in INR will be more profitable, isn’t it possible the easy growth in India is played out?

RE went up 10-20 times in most locations from 2001 to 2011.

Stock market and GDP also went up big time last 15 years but turns out most of those good days were used to fill the coffers of very few due to high corruption, not much dividend left from those days since infrastructure is hugely lacking to support further growth.

So what if this the start of slow stewing in mild growth barely equal to inflation?

Only thing India had ever had was cheap and qualified tech workers and that is still the case , maybe that will keep the lights on until Big breakthrough in AI. There is still a huge demand for tech workers but now even India education system is not able to produce quality surplus labor force.

[wd40]

what investments in INR will be more profitable, isn?t it possible the easy growth in India is played out?

RE went up 10-20 times in most locations from 2001 to 2011.

Stock market and GDP also went up big time last 15 years but turns out most of those good days were used to fill the coffers of very few due to high corruption, not much dividend left from those days since infrastructure is hugely lacking to support further growth.

So what if this the start of slow stewing in mild growth barely equal to inflation?

Only thing India had ever had was cheap and qualified tech workers and that is still the case , maybe that will keep the lights on until Big breakthrough in AI. There is still a huge demand for tech workers but now even India education system is not able to produce quality surplus labor force.

I am not an economist but we need to 1st establish, one thing; Will India continue its current growth rate and emerge from a low income to a middle income country? I.e. from $1700 GDP per capita to around the level of Indonesia or Phillipines around $3000 to 5000 GDP per capita.

I believe it will, I cannot give you any reasons why because I am not an economist, but plenty of people including foreign companies believe that this will happen.

Only, if this thesis comes under threat, then we are doomed.

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[techynt]

I am not an economist but we need to 1st establish, one thing; Will India continue its current growth rate and emerge from a low income to a middle income country? I.e. from $1700 GDP per capita to around the level of Indonesia or Phillipines around $3000 to 5000 GDP per capita.

I believe it will, I cannot give you any reasons why because I am not an economist, but plenty of people including foreign companies believe that this will happen.

Only, if this thesis comes under threat, then we are doomed.

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Will India continue to grow, I can say with confidence of about 95%, yes it will but not much since it lacks natural resources or meaningful government planned export improvement work.

Unfortunately, I don’t think per capita basis we will see much improvements in real terms, biggest reason is India population is still growing a lot, around 15 million per year.

Growing population, which is in excess of what is required to run the economy with given land mass and natural resources (commodities), puts a huge toll on demand for things like energy which would have otherwise gone for building infrastructure.

On top if that you can add the bad governments which never seem to make it a priority to improve infrastructure which in turn will increase productivity and reduce energy consumption, my guess is we must be burning 30-40% more fuel due to congestion in traffic in all metros.

I don’t trust economists to say the truth for some reason they are always trying to sell a point for the benefits of some sponsor.

Just an year ago nobody was saying anything about emerging markets currencies going down like there is nothing left, most of them were still pointing to ever optimistic growth projections of developing countries.

IMO, the only reason India will continue to limp along and not go into severe recession is because of IT services, there is still a demand for millions of people in this sector.