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Rukmani Vishwanath

Mumbai , Dec. 24

THE dollar appears to be slowly losing `market share' to the euro as the currency of choice for invoicing purposes by domestic exporters.

In fact, earlier around 80 per cent of India's exports were invoiced in dollars with the remaining 20 per cent in euro, yen and pound.

But today, only around 60 per cent is done in dollars, while euro alone accounts for 20 per cent with the remaining in yen and pound, according to bankers.

A number of public and private sector banks admit to witnessing a shift in preference in the currencies for invoicing. Bankers ascribe this shift to the sharp weakening of the dollar against the rupee in the recent past.

With the domestic currency appreciating by over 5 per cent against the dollar this year, contrary to its average rate of depreciation of 3-4 per cent per annum, increasing number of enquiries are coming in from traders who want alternatives to invoicing in the dollar, in order to maintain their profit margins, say bankers.

Mr Shah Rukh Wadia, Treasury Head, IndusInd Bank said, "After its introduction, the euro, between the years 1999 and 2001, depreciated sharply by over 30 per cent, from around 1.17 levels to 0.83 per dollar. However, in the past one and a half years it has appreciated from its all time low, by around 35 per cent to 1.24 to the dollar".

Therefore, there is definitely a growing interest in the euro, as long as the view remains that it will continue to appreciate, he said.

Analysts are of the view that exporters who invoice in euro are at an advantage as they can benefit from the lag effect when they receive payments, if the present trend in the currency continues. For example, since the euro is on an appreciation mode, an exporter receiving payment six months down the line will gain further with the currency strengthening further during that time.

"The reverse is also true if the dollar starts to appreciate and the euro beats a retreat. That is why most people are wary of invoicing in the euro. The mindsets have to change.

"Most people still are sitting on the fence and are unable to take a decision on the euro, because on one hand they are expecting a reversal in the US economy, and on the other hand, the importers themselves are of the view that the euro may appreciate further and refuse to consent to invoicing in the currency, as their profitability will be affected," said a banker.

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