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Saturday, May 7, 2011

US Dollar Index and Indian Capital Markets

US dollar index (USDX) measures the performance of US dollar against a basket of six currencies: EURO(EUR),Yen(JPY),Great Britain pound(GBP),Canadian Dollar(CAD),Swiss Franc(CHF) and Swedish Krona (SEK).
USDX is supposed to have an inverse relationship with the global equity markets that means lower USDX is favourable for capital markets.
Weaker USDX makes the investors in USA to shift their funds outside USA especially in the emerging markets
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Since January 2011,USDX is  showing a clear downtrend.
Unless the small spike in the counter direction beginning from 4 May 2011 turns into a major one, climate is favourable for the global capital markets.
But that doesn't mean that every global market shall be the beneficiary, only the most competitive markets with higher GDP rates will be benefitted.

India and China, are the two countries which have higher GDP growth rates.Though due to interest hikes growth shall be hampered  to some extent, but downside seems to be capped.

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