Friday, July 16, 2010
The Indian Cabinet finalized a symbol for its currency, the Indian Rupee on Thursday July 15th 2010, denoting the strength of its growing economy joining a select club of countries whose currencies have a unique identity. The Indian Rupee today became the fifth currency in the world to get its unique symbol which is an amalgam of the Devnagiri Script 'Ra' and the Roman capital 'R' without the stem and two parallel lines running at the top symbolizing an equality sign.
India retains the reputation of developing the concept of coinage and issued some of the earliest coins in the history of mankind, which were the base for other currencies of the world. Continuing on the trails of its golden heritage, the Indian Rupee, the currency of Modern day India has formalized a new symbol for the Indian rupee, which reflects and captures the Indian ethos and culture. The Indian rupee is one of the well-established currencies in the world and in terms of sheer volume, the Indian Rupee is one of the most widely used financial instrument in the world currently being used by almost 20% of the world's population. With India becoming the hotbed of financial investment in recent times, the Indian Rupee is now ready to write a new chapter to complement its glorious past heritage. The significant strength exhibited by the Indian rupee in the recent years along with the continued good performance of the Indian economy have raised the issue of greater internationalization of the Indian rupee. Developing an important brand for the wider Indian economy among international investors and highlighting India's increasing global economic ambitions, the country has joined an elite group as the Indian cabinet approved a new symbol for its national currency emulating the pound, the euro, the dollar and the yen in having its unique distinguishing identity.
Until now, the most common notation for the Indian Rupee “Rs.” was used also being used by several Asian nations including Pakistan, leading international traders to rely on the clunky “INR” to distinguish it. The new symbol will distinguish the Indian currency from currencies of other countries like Pakistan, Nepal, Sri Lanka and Indonesia which also use the word "rupee" or "rupiah" to identify their respective currencies. The new symbol, a combination of the Devnagiri script 'Ra' and the Roman capital 'R', will be used by all individuals and entities after its incorporation in `Unicode Standard’, ‘ISO/IEC 10646’ and ‘IS 13194’.
The need for the symbol had become necessary because of the Indian economy's rapid growth, which has propelled it to become one of the largest economies of the world. The unique symbol for the Indian currency comes after the Reserve Bank of India recently published a study looking into the potential of the rupee to be used in international trade and even as a possible reserve global currency, given the problems confronting the US economy and the dollar. The Indian rupee has been one of the best performing currencies among emerging market economies in the first quarter of 2010, beat currencies from other emerging market economies like Brazil, Russia, Thailand, the Philippines, Vietnam and South Korea.
Currently, Indian rupee is available only in the denomination of Re.1 and Rs.2 coins and notes ranging from Rs.5 to Rs.1000. Paisa coins valuing 25p and 50p are rarely used. A unique feature of the Indian rupee note is its language panel, which depicts what that denomination is called in 15 of the 22 official national languages of India. The Indian currency has been one of the strongest in South Asia but has been hampered in recent times by illegal activities of fake currency notes being pumped into its borders from neighboring countries like Pakistan and Nepal. The attempt to pump in fake notes to destabilize and devalue the Indian currency has so far not had much of an impact on its robust growth mechanism which is backed by solid foundations and deep economic reforms. The publishing and printing of fake Indian currency continues to be a headache for the Indian government as it has started to use fine quality paper and inks that are difficult to imitate. Although India’s currency is on a surge, and it has made its mark as the top-performing currency the extent to which the symbol will gain international usage and cache remains to be seen. The rupee has grown increasingly stable in value. Versus the dollar, it made strong gains until the global flight to the dollar at the height of the worldwide financial crisis.
History Of The Indian Currency
India is the place where the concept of coinage developed at its earliest in around 6th century BC which later on built the base for other currencies of the world. According to the historians, the Indian currency i.e. rupee was brought into existence by Sher Shah Suri in the 16th century and it was evaluated as equal to 40 copper coins per rupee. The dominance of Mughals over India started diminishing when the British arrived in the country. The paper money was introduced under their reign in the latter part of the 18th century. Bank of Hindostan made the earliest rupee notes issues in the year 1770. After independence, the Indian rupee was unified by the Government of India as a single currency for the Republic of India.
Indian Currency Related Funds
After the gradual success of Indian equity ETFs as a low-cost option to gain diversified exposure to Indian equities, more and more investors are looking at the Indian currency funds as with the surge in the Indian currency, Rupee exchange traded funds have also performed handsomely compared to funds of other emerging economies of the world.
For investors who want to invest in currency in the emerging Indian currency market, a favorite investment vehicle continues to be the WisdomTree Dreyfus Indian Ruppee Fund (ICN). The ETF seeks to achieve total returns reflective of both money market rates in India available to foreign investors and changes in value of the Indian Rupee relative to the U.S. dollar. The fund normally invests in a combination of U.S. money market securities with forward currency contracts and currency swaps that are designed to create a position economically similar to a money market security denominated in Indian Rupee. The average portfolio maturity is 90 days or less. It does not purchase any securities with a remaining maturity of more than 397 calendar days. The fund is non-diversified.
With an expense ratio of 0.45%, it seeks to give investors a yield comparable to local money-market rates available to foreign investors. It also provides exposure to the movement of the rupee against the U.S. greenback. However, WisdomTree points out that the ETF is not a money market fund and isn't required to maintain a constant share price.
52 Week Return: 5.41%
YTD Return: -0.08%
1 Week Return: 0.08%
2 Week Return: 0.76%
4 Week Return: -0.36%
13 Week Return: -4.84%
26 Week Return: -2.10%
ICN Expenses & Fees
* Expense Ratio: 0.45%
* Category: Currency
* Category Range: 0.35% to 0.89%
* Category Average: 0.5%
Issuer: Wisdom Tree
Expense Ratio: 0.45%
Another key instrument to bet on he Indian currency is the Market Vectors Indian Rupee-USD ETN (INR) that tracks the exchange rate of the U.S. Dollar against the Indian Rupee. The ETN is an unsecured debt security issued by Morgan Stanley and is based on the S&P Indian Rupee Total Return Index. Total return means that interest earned on funds deposited are reinvested rather than distributed. The Indian Rupee ETN gives investors a low cost way to quickly gain exposure to the movement in the dollar-rupee exchange rate. The annual expense ratio is 0.55 percent and the ETN doesn’t currently pay a dividend.
52 Week Return: 5.22%
YTD Return: -0.05%
1 Week Return: 0.32%
2 Week Return: 1.01%
4 Week Return: -0.42%
13 Week Return: -5.29%
26 Week Return: -3.00%
INR Expenses & Fees
* Expense Ratio: 0.55%
* Category: Currency
* Category Range: 0.35% to 0.89%
* Category Average: 0.5%
Practically speaking, ETNs work much the same way as ETFs, but they’re actually a form of debt instrument. The failure of an ETF provider should, in theory, has no impact on the value of an ETF, because it is backed by securities deposited with a custodian in the name of the ETF itself. ETNs on the other hand are merely structured finance products backed by the unsecured debt of their providers. Holders are therefore exposed to the credit risk of the provider.
The Indian Economic Growth Story
India's economy has experienced rapid growth since liberalization reforms in the early 1990s reduced controls on foreign trade and investment, and the country is widely forecast to become a global superpower. The Indian government predicts the economy will grow by 8.5 % this fiscal year and should hit double-digit expansion within five years. According to the International Monetary Fund, the outlook for India remains positive. Rising incomes should support consumption growth, and robust business confidence, high capacity utilization, and buoyant corporate profits will bolster investment. Over the next few years, growth is likely to moderate toward its potential rate of 8 percent, buttressed by favorable demographics and robust productivity gains.