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Dollar starts new year with a hangover as others find cheer

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The dollar started the new year where it left the old one, under pressure as investors wagered US economic outperformance could be coming to an end as optimism on trade brightens the outlook for growth globally.

Signs of progress in the Sino-US trade dispute undermined the dollar for much of December, leaving its index down 1.9% on the month. It was flat on Thursday at 96.440 having touched a six-month trough ahead of the holidays.

The euro edged up to $1.1220, after gaining 1.8% in December to reach its highest since early August. It now looks set to challenge that August peak at $1.1249.

The dollar looked like slipping further on the Chinese yuan after shedding 1% last month to stand at 6.9640. It was also finely poised on the yen at 108.67, just a whisker from the December lows and major support around 108.40.

“A more encouraging global growth outlook and flush dollar liquidity conditions are undermining the USD,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia.

“Specifically, global fiscal/monetary policy settings will remain accommodative in 2020 and China’s growth slowdown is stabilising.”

China’s central bank on Wednesday cut the amount of cash that banks must hold as reserves, releasing around 800 billion yuan ($114.91 billion) to shore up the economy.

The dollar had benefited from US economic outperformance for much of 2019, but an easing in Sino-US trade concerns has boosted optimism that this year could favour other major nations.

While activity was light on Thursday, traders were on watch for any repeat of last January’s “flash crash” when massive stop-loss selling swept through an illiquid holiday-hit market.

There are fears the same could happen this week with Tokyo off and Japanese retail investors again heavily short of yen and long of risky high-yielding currencies, including the Turkish lira and the South African rand.

For liquidity reasons, these positions are usually “legged” through the US dollar – selling yen for dollars and dollars for lira – so any mass unwinding roils more than just the yen crosses.

Yet, unlike last year, the authorities are on alert with the Financial Futures Association of Japan warning against wild moves.

The Federal Reserve has already averted a squeeze in lending markets as banks took only a small portion of its d $150 billion in year-end funding, leaving repo rates at the lowest since March 2018.

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Vodafone v/s India: Indian govt may have to pay Rs 85 crore if it decides not to appeal

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The Indian government may have to pay a total of Rs 85 crore, if it decides not to appeal against Friday’s ruling of the Permanent Court of Arbitration (PCA) in the Rs 22,100 crore retrospective tax dispute with Vodafone Group. The arbitration tribunal on Friday delivered its verdict in favour of Vodafone against Indian government’s retrospective tax demand of capital gains tax.

As per an IANS report on Saturday, Finance Ministry sources said that the court has asked the Indian government to pay only 4.3 million pounds, or about Rs 40 crore, which is 60 per cent of the tribunal’s administrative cost while the rest 40 per cent would be borne by Vodafone. Also, the government may have to refund the tax collected, which is about Rs 45 crore, only if it does not go for appeal against the award.

Therefore, the total outgo would be around Rs 85 crore only.

The Finance Ministry, in a statement, said that the government will make a decision on the further course of action, including legal remedies, among other options including legal remedies before appropriate fora.

The statement issued by the ministry read as: “The Finance Ministry has just been informed that the award in the arbitration case invoked by Vodafone International Holding BV against Government of India has been passed. The Government will be studying the award and all its aspects carefully in consultation with our counsel”.

Vodafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties’ arbitrators in finalising a judge for a tax dispute. Following this, a tribunal was constituted in June 2016 after Vodafone challenged India’s use of a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone’s $11 billion acquisition of 67 per cent stake in Hutchison Whampoa in 2007.

The retrospective tax law had been enacted after a Supreme Court judgement went in Vodafone’s favour.

Vodafone had challenged the tax department’s demand of Rs 7,990 crore as capital gains tax (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT). In 2007, the Income Tax Department had slapped a demand notice seeking capital gains tax.

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Diesel rates marginally lowered in metropolitan cities for fifth day in a row, petrol unchanged

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Diesel prices continued to fall on Monday, making it fifth day in a row, even though globally crude prices remained steady. In the national capital diesel was priced at Rs 71.43 per litre, down from Rs 71.58 on Sunday.

Similar trend was witnessed in other major metropolitan cities. In Mumbai, diesel was being sold at Rs 77.87 on Monday, against the previous levels of Rs 78.02.

In Chennai and Kolkata diesel rates was at Rs 76.85 and Rs 74.94 on Monday, respectively.

Previously, diesel was priced at Rs 76.99 in Chennai and Rs 75.09 per litre in Kolkata.

In September, diesel rates have been dropped by Rs 2.13 per litre in Delhi this month while petrol price fall has been relatively slower at Rs 0.94 per litre in September.

The recent fall in prices comes in the wake of softening of global oil prices as an extended run of Covid-19 has depressed demand and created a glut in the market.

Prices of petrol, however, remained unchanged for the third straight day at Rs 81.14, Rs 87.82, Rs 84.21 and Rs 82.67 per litre across Delhi, Mumbai, Chennai and Kolkata, respectively.

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Vodafone Idea Board rummaging through all proposals to raise funds; meeting scheduled for September 4

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The Board of Directors of Vodafone Idea Ltd (VIL) are going to hold a meeting on Friday (September 4) to consider and evaluate all proposals for raising funds in one or more tranches by way of a public issue, preferential allotment or private placement among other options.

The announcement comes a day after the Supreme Court on Tuesday delivered its verdict on the staggering payment of Adjusted Gross Revenue (AGR) due issue. The apex court gave a 10-year timeline to the telcos to repay their dues, with an upfront payment of 10 per cent by March 31, 2021.

The company in a regulatory filing, said, “the Board of Directors of the Company is scheduled to be held on September 4, 2020, inter-alia, to consider and evaluate any and all proposals for raising of funds in one or more tranches by way of a public issue, preferential allotment, private placement, including a qualified institutions placement or through any other permissible mode and/or combination thereof as may be considered appropriate, by way of issue of equity shares or by way of issue of any instruments or securities including securities convertible into equity shares, Global Depository Receipts, American Depository Receipts or bonds including foreign currency convertible bonds, convertible debentures, warrants, and/or non-convertible debentures including non-convertible debentures along with warrants, which may or may not be listed.”

“A meeting of the Board of Directors of the Company is scheduled to be held on September 4, 2020, inter-alia, to consider and evaluate any and all proposals for raising of funds,” the company said in a regulatory filing late Tuesday.

As per government’s assessment, Vodafone Idea owed a total of Rs 58,254 crore to the Department of Telecommunications, (DoT). As per the government, the operator now owes balance AGR dues of around Rs 50,399 crore.

On Wednesday, shares of Vodafone Idea rose after plunging in the previous session weighed down by the Supreme Court verdict. Around 11 a.m., its shares on the BSE were trading at Rs 9.61, higher by 8.10 per cent from its previous close.

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