Usual discussions on the fall in the rupee bring up macro-economic matters such as slowing economic growth, corporate earnings and market volatility. However, the woes aren't restricted to corporate corridors or the Dalal Street. For the common man, the falling rupee is going to hit where it hurts the most-the pocket.

From essentials such as food and education to foreign vacation and the swanky gadget you plan to buy, the falling rupee will hurt you in more ways than one.

GROCERY BILL
High inflation has been pinching you for more than a year now. Now, the weakening rupee has made crude oil, fertilisers, medicines and iron ore, which India imports in large quantities, costlier. Though these items are not for your daily consumption, they impact your finances indirectly.

For instance, since India depends on imports for a large part of crude oil it consumes, a weak rupee will influence petrol and diesel prices. "Fuel being directly connected with the cost of transportation, prices of goods that are transported from one part of the country to another, such as food, are bound to rise. This will have a direct impact on the household budget," says Paresh Parekh, Tax Partner, Ernst & Young.

FMCG, or fast moving consumer goods , such as soaps, detergents, deodorants and shampoos, of which crude oil is an input, are likely to become more expensive. 

"The impact of rupee depreciation on the FMCG sector will be due to higher cost of imported raw materials. The companies were already facing cost pressures. The rupee depreciation has added to their woes. They will have to revise prices. Hindustan Uniliver and Procter & Gamble have already taken steps in this direction. Many others will increase prices in the coming months," says Kaustubh Pawaskar, FMCG analyst, Sharekhan.

Pulses and oil, which account for a large part of India's imports, will also be affected. "Crude palm oil prices set the pace for prices of other edible oils. It is imported in large quantities and any rise in its price will add to the inflationary pressure," says Arvind Chari, fund manager, fixed income, Quantum Asset Management. 

"The depreciation of the rupee has considerably affected the price of the edible oil complex in a big way, as we import 60-70% of our requirement. For instance, in November-December 2011, the price of refined soya oil shot up by Rs 75 per 10 kg from Rs 651 to Rs 724," says Hanish Kumar Sinha, head, trade and commodity intelligence group, NCMSL. Sinha expects that refined soy oil will test the Rs 800 per 10 kg level by April

.FOREIGN EDUCATION

For Abin Biswas (21), a B.Tech in biotechnology, an opportunity to work as a trainee intern in a Harvard-MIT joint venture project was a dream come true and a proud moment for his parents. The cost was high but Dr Anup Biswas, Abin's father, decided to bear the expenses. 

"The institute is providing him just a daily travel allowance. So, nearly all expenses have to be borne by us. Though the amount was huge for us, we agreed to send him as the platform he was getting was big as well," says Rinijhini Biswas, Abin's mother. 

With the rupee weakening, the burden has increased. The rent ($378) of a room he shares with friends was Rs 17,000 (at Rs 45/$) in mid-August 2011 when he went. Now, it is Rs 19,500 (Rs 51.52/$). A meal ($6) which cost him Rs 270 then now costs Rs 300. This means an additional food expense of Rs 1,800 per month. 

"Abin's monthly budget, roughly $1,000, has risen from Rs 45,000 to Rs 53,000, the last instalment we paid. It will be difficult for us to bear his expenses if the trend continues," says Rinijhini Biswas.

Students who have taken loans to fund their foreign degree are also bearing the brunt. Education loans are usually in rupees, but as students pay their expenses in a foreign currency, the cost of education and stay has increased. For $100,000, a student had to pay Rs 45 lakh. Now, he has to shell out Rs 52-54 lakh, depending upon the exchange rate. 

"The cost is in a foreign currency while the borrowing is in rupees. So, the students may fall short of funds as the loan would have been taken according to the initial requirements. In such a scenario, either the student's personal contribution will have to increase or he will have to ask the bank to increase the loan amount," says Ashutosh Khajuria, president, treasury, Federal Bank.

JOBS AND REMUNERATION

Not only is the rupee falling, for some, the pay cheque may shrink as well. Every industry which is dependent on imports will have to face an increase in cost of production and operations. 

"In order to nullify the increase, these companies will have to rationalise costs within their control. One of this will be human resources. So, either lesser number of people will be hired or the salary bill will be kept constant or reduced," says Rituparna Chakraborty, co-founder and senior vice president, TeamLease Services.

However, it is a good time for industries which earn in dollars. "The information technology sector stands to gain, but global recessionary conditions may set off the impact," says Chakraborty.

VACATIONS

The falling rupee is bad news for itinerant Indians and vacationers to a foreign country. "Air fares are going up due to an increase in fuel surcharge. The stay will be costlier by at least 3-5%. Also, shopping can become expensive by 5%. Eating out will also be costlier by the same percentage," says Karan Anand, head, relationships, Cox & Kings India.

Quote
Air fares are going up. Your foreign stay will be costlier by at least 3-5 per cent while shopping can become expensive by 5 per cent. Eating out will also be costlier by the same percentage.
Karan Anand
Head, Relationships, Cox & Kings India
However, that holiday package you booked in advance before the rupee fell is safe. The impact of rupee depreciation will not become evident immediately as most people usually make travel plans well in advance. 

"The real impact will be felt by summer of 2012. We have received requests for cancellations, but these are within the normal range. There are certainly some changes in travel patterns'holidays are being cut short, short-haul destinations are being preferred and people are opting for non-dollar destinations such as Sri Lanka, Dubai, Bali and Phuket or sticking to domestic destinations such as Kashmir, Kerala and Goa," says Anand Kandadai, senior vice president, holidays, Makemytrip.com.

The travel cover, mandatory in some cases, may cost more as well. "At present, travel policies' benefits are denominated in US dollars. The depreciation of the rupee will not impact customers but will cost re-insurers more. But if this trend continues there is a strong case for upward revision of premiums," says Gaurav Garg, MD and CEO, Tata AIG General Insurance.

BUYING A CAR

The depreciation of rupee has impacted the automobile sector in three ways. First, input costs have risen as these companies use imported components. Second, some companies will have to pay higher royalty to foreign parent firms. Third, many have foreign currency loans in the form of external commercial borrowings and foreign currency convertible bonds. 

Therefore, more or less all auto companies will have to increase prices. "We expect at least a further 2% increase in prices. Maruti has already revised prices twice in last two months. Others like Hyundai, Honda and Ford that have large import content in their cars will have to soon increase prices to protect margins," says Deepak Jain, assistant VP and research analyst, Sharekhan Institutional Research.

ENTERTAINMENT

The imported paperback, your favourite pizza and the latest laptop will also become more expensive. "There is an increase in the cost of imported books as well as the cost of sourcing them. 

In most cases we are trying to absorb the increased cost, but there may be scenarios where the end-user will get impacted," says Ankit Nagori, VP, categories, Flipkart.com.

Electronic consumer goods such as computers, televisions, mobile phones, etc, with imported components will also become costlier. International food chains which run outlets in India are not denying the impact on profitability. 

"The depreciating rupee has had a significant impact on our capital expenditure as we import a lot of special kitchen equipment. There has been an indirect impact too as a small part of inputs are imported by our suppliers. If the trend continues, we will be forced to pass on some burden to customers," says Vikram Bakshi, managing director and JV Partner, McDonald's India (North & East).

It's estimated that as many as 59 million Americans have a thyroid problem, but the majority don't know it yet. The thyroid, a butterfly-shaped gland located in the neck, is the master gland of metabolism. When your thyroid doesn't function, it can affect every aspect of your health, and in particular, weight, depression and energy levels.

Since undiagnosed thyroid problems can dramatically increase your risk of obesity, heart disease, depression, anxiety, hair loss, sexual dysfunction, infertility and a host of other symptoms and health problems, it's important that you don't go undiagnosed.

You don't need to have all of these symptoms in order to have a thyroid problem, but here are some of the most common signs that you may have a thyroid condition:

10. Muscle and Joint Pains, Carpal Tunnel/Tendonitis Problems.

Aches and pains in your muscles and joints, weakness in the arms and a tendency to develop carpal tunnel in the arms/hands, tarsal tunnel in the legs, and plantars fasciitis in the feet can all be symptoms of undiagnosed thyroid problems. (For more information)

9. Neck Discomfort/Enlargement.

A feeling of swelling in the neck, discomfort with turtlenecks or neckties, a hoarse voice or a visibly enlarged thyroid can all be signs of a "goiter" -- an enlarged thyroid gland that is a symptom of thyroid disease.

To help find out if your thyroid may be enlarged, try a simple "Thyroid Neck Check" test at home.

8. Hair/Skin Changes.

Hair and skin are particularly vulnerable to thyroid conditions, and in particular, hair loss is frequently associated with thyroid problems. With hypothyroidism, hair frequently becomes brittle, coarse and dry, while breaking off and falling out easily. Skin can become coarse, thick, dry,and scaly. In hypothyroidism, there is often an unusual loss of hair in the outer edge of the eyebrow. With hyperthyroidism, severe hair loss can also occur, and skin can become fragile and thin.

7. Bowel Problems.

Severe or long-term constipation is frequently associated with hypothyroidism, while diarrhea or irritable bowel syndrome (IBS) is associated with hyperthyroidism.

6. Menstrual Irregularities and Fertility Problems.

Heavier, more frequent and more painful periods are frequently associated with hypothyroidism, and shorter, lighter or infrequent menstruation can be associated with hyperthyroidism. Infertility can also be associated with undiagnosed thyroid conditions. (For More Information)

GOLD LIVE CHART

Gold

MonthlyThe WSJ (see front page) ‘closed the book on an historic rally’ in gold today. Interestingly, the market is nearing levels from which to attempt an advance. Keep the following levels in mind…

-1156 (July 2010 low), 1086 (50% retracement of the rally from the 1999 low), and 1033/44 (2008 high and 2010 low).

-The drop from the 2011 high can be counted in 5 waves with wave 5 in progress (Elliott). 61.8% of waves 1 through 3 yields 976 (it’s worth noting that on long term arithmetic charts, markets sometimes come up short of bearish targets but exceed bullish targets…think about the math). Watch the 1-3 line (line off of the September 2011 and June 2013 lows) for support as well.

MCX CRUDE LIVE CHART

Charts suggest decline in crude oil may be overIn our previous essay, we examined the situation in crude oil in different time horizons. Back then, we wrote that the short-term situation had improved as crude oil had broken above both short-term resistance lines on relatively high volume and had come back above the previously-broken medium-term support line and the long-term one.

In the following days, crude oil extended gains and approached its 200-day moving average. What’s next? Is the worst already behind oil bulls and we will see further improvement? Before we try to answer these questions, we’ll examine three interesting ratios to see if there’s anything on the horizon that could drive crude oil higher or lower in the near future. Let’s start with the oil-to-oil-stocks ratio (charts courtesy by http://stockcharts.com).

At the end of October, the ratio declined and broke below the long-term declining support line created by the 2012 and 2013 lows. Additionally, the WTIC:XOI ratio verified the breakdown, which was a strong bearish signal. In our previous Oil Investment Update we wrote that as long as the breakdown below the bold blue support line was not invalidated, another downswing couldn’t be ruled out.

Looking at the above chart, we see that the ratio reached the next long-term support line (marked with the thin blue line on the previous chart) and rebounded sharply in the previous week. In this way, the ratio invalidated the breakdown below the support line based on the 2012 and 2013 lows, which is a strong bullish sign.

Last week, the ratio reached its 50-day moving average and reversed the course – similarly to what we saw in April, May and June. However, we should keep in mind that back then, new lows in ratio didn’t trigger a fresh low in crude oil. Therefore, if history repeats itself once again, we may see lower values of light crude in near future, but another big move lower doesn’t seem likely.

The Case For A December Taper Just Got A Whole Lot Stronger

"After a week of surprisingly good economic data and the likelihood of another government shutdown approaching zero, the Federal Reserve will likely taper in December if it sticks to the plan it laid out over the summer," concluded Business Insider's Danny Vinik on November 11.
At the time of Vinik's analysis, most of Wall Street's economists were unwilling to forecast a December tapering of the Fed's $85 monthly quantitative easing program.

But that sentiment has shifted in the wake of the surprisingly strong November jobs report, the surprisingly strong November retail sales report, and the earlier-than-expected U.S. budget deal.

"It's still a close call, but chances are now above 50 percent that the Federal Reserve will modestly reduce its asset purchases later this month," said Potomac Research Group's Greg Valliere who was communicating the analysis of former Fed Vice Chair Don Kohn. "There's a 60-40 chance that the FOMC will decide on Dec. 18 to begin tapering."

"The final piece of the puzzle may have been yesterday's solid retail sales data, a sign that the recent improvement in the labor market may finally be producing stronger spending," he added. "Agreement on a budget deal, eliminating a major source of uncertainty, is another factor supporting a December taper."

But could the markets handle it?

"I think a few weeks ago investors would have been pretty concerned about the idea of [a December] taper because the data didn't really give them comfort that the economy was at escape velocity," said JP Morgan's Tom Lee. But "with Friday's jobs report and some of the other ones we've had recently, you know I think investors are getting comfortable if it does happen in December."

The Federal Reserve will conclude its next Federal Open Market Committee (FOMC) meeting and publish its statement at 2:00 p.m. ET on Wednesday, December 18. The consensus among Wall Street's economists is no taper.

Factors affecting gold beyond December FOMC meeting

Stronger U.S. Sentiments

On Thursday, the U.S. House approved a bipartisan federal budget plan to avert a government shutdown in the next two years. The plan did not touch the entitlement spending or corporate taxes. The U.S. debt ceiling was not raised either, with a likely showdown between the parties in February. The removal of this uncertainty has lessened the appeal of gold as a safe haven. The U.S. retail sales rose by a stronger-than-expected 0.7% in November compared to a 0.6% rise in October. Stronger personal spending, expected to be 3.5% annualized, may help to lift the GDP growth in Q4. These stronger data have more than offset the weaker report shown by a jump in the latest weekly jobless claims to a two-month high of 368,000. The gold market is increasingly factoring in the possibility of a Fed tapering next week.

Near and Longer-term Factors for Gold

Lack of near-term positive gold price catalysts and the recovery in the stock markets have prompted holders of the SPDR Gold Trust to liquidate their holdings, which have fallen 39% this year to 827.6 metric tons. Expected near-term Fed tapering and the retrenchment of the largest gold consumer, India, due to its government's import curbs are the two big factors hurting gold prices this year. In the longer-run, the reduction in QE, which is expected to be gradual, and the very low real interest rate, are positive factors for gold. A 50-year chart of the gold price versus the S&P 500 Index shows that the current ratio of 0.7 is way below the long-term average of 1.13.

What to Watch

All eyes will be on the FOMC meeting on Dec. 17-18. We will also monitor the December flash PMI for China, E17, and the U.S. on Dec. 16, the November U.S. CPI on Dec. 17, the U.S. FOMC decision, the November U.S. housing starts, and the December Germany IFO business climate on Dec. 18 as well as the November U.S. existing home sales on Dec. 19. 

Factors affecting gold beyond December FOMC meeting

What If the Fed Does Taper QE? 8 Possible Scenarios
In previous articles and market overview reports, my firm discussed the unique macroeconomic position of gold (gold is a system hedge). The main conclusion was that gold is something else than its highly touted reputation as an inflation hedge. This realization is crucial for any gold investment decisions. Actually, when it comes to gold and the case for it or against it, there are many conflicting arguments. On one hand, we hear stories about the threat of inflation and a sharp rise of overall prices, therefore we're told that one should invest in this shiny asset. We also hear about credit deflation, banks in trouble, and financial markets that are not in great shape, making gold a good alternative. Having been fed all kinds of information, one can have trouble inferring what to do in various scenarios.
 
As always, there are many ways in which the situation can develop, and in today’s article we will focus on what's probably the most important factor that will, to a great extent, determine what will happen in the coming months -- not just in the precious metals market, but also in bonds, stocks, and real estate markets.
 
Yes, you guessed correctly -- we are going to discuss the Fed’s possible actions and the likely way this could affect the markets. Will we actually see any form of tapering or will we just hear about it? If so how will remarks made by the Fed impact actual events? As you know, very often what Ben Bernanke or some other Fed official says can ignite large price moves. So, for the analysis to be complete, we should focus not only on what happens, but also on how it is announced.
 
In the following part of this article we will discuss what’s likely to happen if the Fed does indeed taper the QE program.

Based on the possible combinations, we created eight scenarios, and we will discuss how each of the markets (gold, stocks, bonds, real estate) could perform in each of them. We also explain which are the most and least likely. If they play out in the future you will already know what to expect in the following weeks/months.
 
The involvement of the Fed in buying assets makes it the most important player in the financial market. Over $3.5 trillion amounts to 23% of the American GDP (compare that to “savings,” which are almost two times less than that). There are “rumors” about the Federal Reserve System’s possible stepping back from its policy of quantitative easing. The rumors came from Bernanke’s speech, and were slightly present in Fed’s minutes from July 30-31 (the minutes were published on the August 21. They register discussions that take place during Federal Open Market Committee meetings).
 
The so-called tapering of the Fed would mean a significant slowdown of the programs (which lead to an increase in the assets holdings). Many observers argued that tapering is supposed to start before the end of 2013, September being the likely candidate. The minutes do not confirm this, at least not strongly. We can read that "almost all Committee members agreed that a change in the purchase program was not yet appropriate." There was only one mildly dissenting voice about some improvement in the labor market as a reason for the Committee to offer an explicit statement about asset purchase reduction in the "near future." A few members responded that patience is needed in order to carefully evaluate the economic data. A few others responded that the plan was already articulated (although not very strongly), and that the programs will be reduced.
 
In conclusion the Fed decided to keep the programs floating: They buy $40 billion of mortgage backed securities and $45 billion of Treasuries each month in order to bid the prices of both (and keep the returns low). Moreover, the interest rate is supposed to stay at the current low level of 0.25% as long as the unemployment rate stays below 6.5%, and the official inflation rate is not half a percentage point higher than the main policy goal of 2%. 

XAUUSD SIGNALS

Weekly Forecast, 09 - 13 December

Main scenario:
The pair is trading along an sideways trend.
The downtrend may be expected to continue in case the market drops below support level 1236, which will be followed by reaching support level 1200.

Alternative scenario:
An uptrend will start as soon, as the pair rises above resistance level 1251, which will be followed by moving up to resistance level 1270 and then to 1289. And if it keeps on moving up above that level, we may expect the pair to reach resistance level 1330.

S/R levels:
Supports: 1236 (main), 1221 (strong), 1200
Resistances: 1251 (main), 1270 (strong), 1289 (main), 1330 (strong)

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Main scenario:
The pair is trading along an sideways trend.
An uptrend will start as soon, as the pair rises above resistance level 1236, which will be followed by moving up to resistance level 1251.

Alternative scenario:
An downtrend will start as soon, as the pair drops below support level 1218, which will be followed by moving down to support level 1208 and then to 1200.

S/R levels:
Supports: 1223 (strong), 1218 (main), 1208, 1200
Resistances: 1236 (strong), 1243, 1251