Guest views are now limited to 12 pages. If you get an "Error" message, just sign in! If you need to create an account, click here.

Jump to content
  • CRYPTO REWARDS!

    Full endorsement on this opportunity - but it's limited, so get in while you can!

India trading currency with Iraq


Dinarian64
 Share

Recommended Posts

I got this off another site:

INDIA CAN NOW TRADE IN 23 CURRENCIES OUTSIDE OF USD

Bilateral talks to follow Finance Ministry approval

NEW DELHI, DEC. 23:   

The Commerce Ministry has finalised a list of 23 countries with which India can trade in local currencies to save precious foreign exchange and strengthen the rupee.

The list includes oil exporting nations such as Angola, Algeria, Nigeria, Oman, Iran, Iraq, Venezuela, Qatar, Yemen and Saudi Arabia.

Commerce Minister Anand Sharma is likely to approve shortly the report on currency swap finalised by a task-force headed by Special Secretary Rajiv Kher following which it will be discussed with the Finance Ministry, a Commerce Ministry official told Business Line.

A currency swap arrangement for trade basically involves trading in local currencies where countries pay for exports and imports with domestic currencies at pre-determined exchange rates instead of trading in US dollars.

Other countries on the list include Russia, Japan, Singapore, Australia, Indonesia, South Korea, Malaysia, Mexico, South Africa and Thailand.

“The 23 countries have been identified based on how feasible a currency swap arrangement for exports and imports would be with each. Our emphasis has been on countries with which India has a sizeable trade deficit so that we end up saving foreign exchange,” the official said.

After the Finance Ministry’s approval, the Commerce Ministry will hold bilateral talks with the identified countries. “A currency swap deal will work only if it is a win-win for both countries. The trading partner should have sufficient trade and investment interest in India,” the official added.

http://www.thehindubusinessline.com/industry-and-economy/banking/for-rupee-boost-govt-draws-up-list-of-23-countries-for-currency-swap-arrangement/article5494318.ece

  • Upvote 5
Link to comment
Share on other sites

"18 The word “swap” is intended to convey the short-term, ex-post conditionality-free nature of the arrangement
rather than the formal swap of asset streams; in a sense, all Fund lending is a “swap” insofar as freely usable
currencies are made available in exchange for the member’s own currency"

 

http://www.imf.org/external/np/pp/eng/2010/032510a.pdf

 

http://bibliotecadigital.fgv.br/dspace/bitstream/handle/10438/11306/RPS_83_final.pdf?sequence=1     -   please see pages 18-23 beginning at : "6 Exchange Rate Misalignments and Bilateral Solutions / Currency Swap Agreements"

Link to comment
Share on other sites

The above mentioned paper (last link) states that China and Brazil made a currency swap agreement which entailed maintaining an equal exchange rate so as not to mis-align their respective economies.  If this is true, then I think that this currency swap has not yet been performed but may be in the works. And, if so, the rupee should be in alignment with these other currencies. IDK for a fact but it makes sense to me that they either have individualized currency swap trade agreements with each country OR they're going to all agree to a similar rate between all of the countries.  I'm new to this type of analysis but would appreciate input. Thank you.

Link to comment
Share on other sites

"Dr. Mohammed Saleh, said that the Bank of International Settlements, accept deposits from Iraq will benefit the country through capital investment projects, financial investments. Was the Bank for International Settlements (BIS) which is an acronym for the Bank for International Settlements)) may feel the CBI Sunday past, his willingness to accept deposits Iraq for Fiscal Year 2014. Saleh added in a statement to the (morning) that this measure would provide service to the country's economy through the BIS financial investments ongoing interest rate or interest-free and by currency, whether in euro or the dollar or other currencies . investment reserves
He explained that it is under a formal contract signed with the Iraqi government. Indicating that the BIS is planning to invest an annual cash reserves deposited with him by central banks, pointing out that its membership includes 60 national central banks including the Central Bank of Iraq.
And the benefit is that the BIS Bank global central banks and supervisory represents the global banking system, all banks in terms of commitment to the decisions of the Basel application which determines the efficiency of the banking systems in the world. He pointed out that in accordance with the Charter of the United Nations, can hold shares in the bank by individuals and non-governmental entities."

Read more: http://dinarvets.com/forums/index.php?/topic/168253-new-cbi-announcements-12222013/page-4#ixzz2odPrW1qi

 

I wonder if the IMF over-sees the BIS?

 

4. An agent or trustee in connection with selected international financial operations

The BIS often assists in the execution of various international financial agreements. For example, the BIS acted as the agent for the European Currency Union Clearing and Settlement System from 1986 until 1998. Additionally, the BIS assumed responsibilities in rescheduling Brazilian external debt during the countryís financial crisis of 1994. During the Brazilian financial crisis, the BIS served as collateral agent to hold and invest bonds in U.S. dollars issued by Brazil under its rescheduling agreements.

 

B. The BIS Plays an Important Role in Maintaining Global Monetary and Financial Stability

1. The BIS provides emergency financial assistance when needed

One way in which the BIS helps to stabilize the monetary and financial markets is to provide emergency financial assistance to central banks in times of need. The BIS accomplishes this by working very closely with the IMF, which is charged with assisting countries in financial crises by making short-term loans to the governments in need. While the IMF focuses on the financial health of the country as a whole, the focus of the BIS is narrow, focusing on an individual countryís central banking operations. For the IMF to succeed in helping a nation out of a financial crisis, the BIS must be present to oversee the nationís banking system and to coordinate funding from other central banks.

For example, the BIS worked with the United States, Canada, and the IMF to collect an estimated $48.8 billion to assist Mexico when its pesoís devaluation triggered a devastating crisis during 1994-95. A portion of this $48.8 billion included a $10 billion short-term facility raised by the BIS to help Mexico overcome its short-term liquidity crises. With the support of several central banks, the BIS also funded one-half of a $12 billion swap facility, which was designed to help Mexico get through its August 1995 presidential election. The BIS provided similar assistance to Brazil during its crisis in 1998. While coordinating with the IMF, the BIS secured $14.5 billion in guaranteed loans from twenty countries to help Brazil after the devaluation of its currency triggered a financial crisis.

 

http://blogs.law.uiowa.edu/ebook/faqs/what-is-the-bank-for-international-settlements



The basic mechanics of FX swaps and cross-currency basis swaps  
1 September 2008
 

(Extract from pages 73-86 of BIS Quarterly Review, March 2008)

An FX swap agreement is a contract in which one party borrows one currency from, and simultaneously lends another to, the second party. Each party uses the repayment obligation to its counterparty as collateral and the amount of repayment is fixed at the FX forward rate as of the start of the contract. Thus, FX swaps can be viewed as FX risk-free collateralised borrowing/lending. The chart below illustrates the fund flows involved in a euro/US dollar swap as an example. At the start of the contract, A borrows X·S USD from, and lends X EUR to, B, where S is the FX spot rate. When the contract expires, A returns X·F USD to B, and B returns X EUR to A, where F is the FX forward rate as of the start.

FX swaps have been employed to raise foreign currencies, both for financial institutions and their customers, including exporters and importers, as well as institutional investors who wish to hedge their positions. They are also frequently used for speculative trading, typically by combining two offsetting positions with different original maturities. FX swaps are most liquid at terms shorter than one year, but transactions with longer maturities have been increasing in recent years. For comprehensive data on recent developments in turnover and outstanding in FX swaps and crosscurrency swaps, see BIS (2007).

 

qt0803y.gif

 

A cross-currency basis swap agreement is a contract in which one party borrows one currency from another party and simultaneously lends the same value, at current spot rates, of a second currency to that party. The parties involved in basis swaps tend to be financial institutions, either acting on their own or as agents for non-financial corporations. The chart below illustrates the flow of funds involved in a euro/US dollar swap. At the start of the contract, A borrows X·S USD from, and lends X EUR to, B. During the contract term, A receives EUR 3M Libor+ α from, and pays USD 3M Libor to, B every three months, where α is the price of the basis swap, agreed upon by the counterparties at the start of the contract. When the contract expires, A returns X·S USD to B, and B returns X EUR to A, where S is the same FX spot rate as of the start of the contract. Though the structure of cross-currency basis swaps differs from FX swaps, the former basically serve the same economic purpose as the latter, except for the exchange of floating rates during the contract term.

Cross-currency basis swaps have been employed to fund foreign currency investments, both by financial institutions and their customers, including multinational corporations engaged in foreign direct investment. They have also been used as a tool for converting currencies of liabilities, particularly by issuers of bonds denominated in foreign currencies. Mirroring the tenor of the transactions they are meant to fund, most cross-currency basis swaps are long-term, generally ranging between one and 30 years in maturity.

 

qt0803z.gif

http://www.bis.org/publ/qtrpdf/r_qt0803z.htm

Edited by TBomb
  • Upvote 2
Link to comment
Share on other sites

Here is the entire article:

 

For rupee boost, Govt draws up list of 23 countries for currency swap arrangement

Bilateral talks to follow Finance Ministry approval

NEW DELHI, DEC. 23: 
The Commerce Ministry has finalised a list of 23 countries with which India can trade in local currencies to save precious foreign exchange and strengthen the rupee.

The list includes oil exporting nations such as Angola, Algeria, Nigeria, Oman, Iran, Iraq, Venezuela, Qatar, Yemen and Saudi Arabia.

Commerce Minister Anand Sharma is likely to approve shortly the report on currency swap finalised by a task-force headed by Special Secretary Rajiv Kher following which it will be discussed with the Finance Ministry, a Commerce Ministry official told Business Line.

A currency swap arrangement for trade basically involves trading in local currencies where countries pay for exports and imports with domestic currencies at pre-determined exchange rates instead of trading in US dollars.

Other countries on the list include Russia, Japan, Singapore, Australia, Indonesia, South Korea, Malaysia, Mexico, South Africa and Thailand.

“The 23 countries have been identified based on how feasible a currency swap arrangement for exports and imports would be with each. Our emphasis has been on countries with which India has a sizeable trade deficit so that we end up saving foreign exchange,” the official said.

After the Finance Ministry’s approval, the Commerce Ministry will hold bilateral talks with the identified countries. “A currency swap deal will work only if it is a win-win for both countries. The trading partner should have sufficient trade and investment interest in India,” the official added.

A $10.7-billion depletion in India’s foreign exchange reserve in the first half of the current fiscal due to a decline in net capital inflows is a cause of concern for the Government as lower reserves weaken the rupee, which in turn drives out foreign investments. While the country’s current account deficit has narrowed to 3.1 per cent of GDP in the first half of the fiscal, compared to 4.5 per cent in the first half of the previous year, the Finance Ministry is keeping an eye on it. If India manages to trade in rupees even with a handful of countries, it will contribute significantly towards stabilising the country’s balance of payments (BoP) position. At present, India has a rupee trading account with Iran, which was put in place to bypass the sanctions of the US and the EU against the country for its alleged nuclear activities.

In the case of Iran, where payments for 45 per cent of the oil purchased from the country are made in rupees, its success was driven by strategic factors. However, for other countries, the success of this system has to be judged purely on economic terms.

amiti.sen@thehindu.co.in

(This article was published on December 23, 2013)

 

http://www.thehindubusinessline.com/industry-and-economy/banking/for-rupee-boost-govt-draws-up-list-of-23-countries-for-currency-swap-arrangement/article5494318.ece
 

Link to comment
Share on other sites

 

The basic mechanics of FX swaps and cross-currency basis swaps  

1 September 2008
 

(Extract from pages 73-86 of BIS Quarterly Review, March 2008)

An FX swap agreement is a contract in which one party borrows one currency from, and simultaneously lends another to, the second party. Each party uses the repayment obligation to its counterparty as collateral and the amount of repayment is fixed at the FX forward rate as of the start of the contract. Thus, FX swaps can be viewed as FX risk-free collateralised borrowing/lending. The chart below illustrates the fund flows involved in a euro/US dollar swap as an example. At the start of the contract, A borrows X·S USD from, and lends X EUR to, B, where S is the FX spot rate. When the contract expires, A returns X·F USD to B, and B returns X EUR to A, where F is the FX forward rate as of the start.

FX swaps have been employed to raise foreign currencies, both for financial institutions and their customers, including exporters and importers, as well as institutional investors who wish to hedge their positions. They are also frequently used for speculative trading, typically by combining two offsetting positions with different original maturities. FX swaps are most liquid at terms shorter than one year, but transactions with longer maturities have been increasing in recent years. For comprehensive data on recent developments in turnover and outstanding in FX swaps and crosscurrency swaps, see BIS (2007).

 

qt0803y.gif

 

A cross-currency basis swap agreement is a contract in which one party borrows one currency from another party and simultaneously lends the same value, at current spot rates, of a second currency to that party. The parties involved in basis swaps tend to be financial institutions, either acting on their own or as agents for non-financial corporations. The chart below illustrates the flow of funds involved in a euro/US dollar swap. At the start of the contract, A borrows X·S USD from, and lends X EUR to, B. During the contract term, A receives EUR 3M Libor+ α from, and pays USD 3M Libor to, B every three months, where α is the price of the basis swap, agreed upon by the counterparties at the start of the contract. When the contract expires, A returns X·S USD to B, and B returns X EUR to A, where S is the same FX spot rate as of the start of the contract. Though the structure of cross-currency basis swaps differs from FX swaps, the former basically serve the same economic purpose as the latter, except for the exchange of floating rates during the contract term.

Cross-currency basis swaps have been employed to fund foreign currency investments, both by financial institutions and their customers, including multinational corporations engaged in foreign direct investment. They have also been used as a tool for converting currencies of liabilities, particularly by issuers of bonds denominated in foreign currencies. Mirroring the tenor of the transactions they are meant to fund, most cross-currency basis swaps are long-term, generally ranging between one and 30 years in maturity.

 

qt0803z.gif

http://www.bis.org/publ/qtrpdf/r_qt0803z.htm

 

TQ TBomb :) 

Link to comment
Share on other sites

“The 23 countries have been identified based on how feasible a currency swap arrangement for exports and imports would be with each. Our emphasis has been on countries with which India has a sizeable trade deficit so that we end up saving foreign exchange,” the official said.



"TQ"?  

  • Upvote 1
Link to comment
Share on other sites

The above mentioned paper (last link) states that China and Brazil made a currency swap agreement which entailed maintaining an equal exchange rate so as not to mis-align their respective economies.  If this is true, then I think that this currency swap has not yet been performed but may be in the works. And, if so, the rupee should be in alignment with these other currencies. IDK for a fact but it makes sense to me that they either have individualized currency swap trade agreements with each country OR they're going to all agree to a similar rate between all of the countries.  I'm new to this type of analysis but would appreciate input. Thank you.

"After the Finance Ministry’s approval, the Commerce Ministry will hold bilateral talks with the identified countries. “A currency swap deal will work only if it is a win-win for both countries. The trading partner should have sufficient trade and investment interest in India,” the official added."

 

 

So, based on this, I'm surmising that the deals will be respective/diff w/ each country and that the BIS and IMF work in coordination.

 

Here's another interesting research link:  http://www.bis.org/publ/rpfx13fx.pdf

Edited by TBomb
Link to comment
Share on other sites

What's the most interesting to me, If India were to do a currency swap with Iraq prior to a positive revalue of the Iraqi Dinar, that would give great buying power to India. I doubt there is a possibility where Iraq could devalue their currency anymore, since most economists agree it is extremely undervalued.  We just saw Venezuela devalue their currency by 30%.  If India were to have performed  this currency swap with Venezuela prior to devaluation, economically India could loose tremendously.  So there has to be some kind of safety net with these swaps, and from what I'm reading Venezuela may devalue even more after the first of the year. “This is the first step toward an officially weaker exchange rate across the board,” Daniel Snowden,emerging markets economist at Informa Global Markets in London, said by telephone today. “We are looking at a significant devaluation early next year.” http://www.bloomberg.com/news/2013-12-23/venezuela-devalues-bolivar-for-tourist-dollars-to-boost-reserves.html .   Anyway, I think this topic is one to keep our eye's on, not just because of the currency swaps, but, also what's being traded.  If Iraq trades oil for the Rupee, now we have something to talk about!

Edited by Butifldrm
  • Upvote 1
Link to comment
Share on other sites

Hard to tell PT, many economists say that there are too many countries using the usd as their reserve currency to take them off using the usd as their reserve currency, without a huge global shock. Others say this will happen gradually over time (USD no longer reserve currency).  Others say that we're going back to the pre Bretton-Woods era (before 1944).  

Link to comment
Share on other sites

LGD, I'd be grateful if you would kindly share why you're concluding that Iraq's online from this article (for us a little slower than yourself :-)?  Thanks.

Not sure if that was a slap,

Anyways, I wasn't only referring to this one article but several articles in which we

have learned about Swift codes and BIS deposits. And this is not the first time we've

heard about a currency swap with India. They talked about it last year as well. Though

I don't remember if they actually did it. All this happening gives strong Indication that

Iraqi banking system's are fully functioning. IMHO

Link to comment
Share on other sites

No LGD, it was not a slap. I was being sincere.

Well then I am GREATLY humbled. As to be quite honest my comment about all

This being above my pay grade was to say that you and a few others here have grasped

The technical aspects of it, whilst I see things from a more broader point of view.

Simply put I envy people like you that can understand the intricate details of a subject

but I love that I can understand why people do what they do. Putting your intelligence

together with my broad view of social behavior and we'll most likely nail this right on

the head.

Link to comment
Share on other sites

Well then I am GREATLY humbled. As to be quite honest my comment about all

This being above my pay grade was to say that you and a few others here have grasped

The technical aspects of it, whilst I see things from a more broader point of view.

Simply put I envy people like you that can understand the intricate details of a subject

but I love that I can understand why people do what they do. Putting your intelligence

together with my broad view of social behavior and we'll most likely nail this right on

the head.

 

I like hanging out with smart people like you guys....makes me look sooooo smart too!!!

thanks to you both for all you bring to us

  • Upvote 1
Link to comment
Share on other sites

Welcome to State Bank of India, United States, the US presence of India's largest bank.

SBI’s US Offices are your best link to India with a 15000+ branch network of SBI and its Associate Banks in India.

SBI’s US branches offer a wide array of services including money transfer, deposits, loans and trade services.

https://www.statebank.com

Who's gonna volunteer to call them ?

Mr. Sanjay Kapoor Representative 202 223 5579 rep.washington@statebank.com

Lol

Link to comment
Share on other sites

Ya know they couldn't possibly offer any more than the cbi price minus the spread or fee

So we still got to wait for that rv

I don't know a about you guys but I'm ready to wait forever for that rv

Do ya think Iraq will wait till they rv to trade or swap currencies or just swap away

http://www.federalreserve.gov/newsevents/reform_swaplines.htm

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.


  • Testing the Rocker Badge!

  • Live Exchange Rate

×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.