A very low rate of savings among Americans is a key reason for the weakening of US dollar, which in turn is hitting the bottomlines of Indian IT firms, feels Azim Premji, the billionaire chief of country's third- largest software exporter Wipro."I think the fundamental problem (behind the weak dollar) is the very low savings rate among Americans," he said in an interview to US business publication Forbes.The savings rate is virtually zero per cent among Americans, while the same is at 35 per cent and 45 per cent for India and China, respectively, Premji said.Replying to a query whether he was worried about the weak dollar, Premji said, "The weak dollar is not good for our business, since we get paid in dollars".However, on a positive note, the Wipro chief said the dollar seems to have stabilised. "I do not see it getting much weaker, because the US is a source of creativity and innovation," Premji said.The weakening of dollar has been a key concern of Indian IT firms such as Wipro in the recent past. As exports account for a major chunk of their revenues, a stronger rupee affects their profit margins adversely and this phenomenon has somehow started to rob the Indian firms of their low-cost status.In its latest annual filing to US market regulator SEC, NYSE-listed Wipro said the appreciation in rupee against major currencies such as dollar could adversely impact its revenues, margins and even competitive positioning in the industry.Echoing these views, another US-listed Indian IT firm Infosys, the country's second-largest software exporter after TCS, said in its annual report that results of its operations get adversely affected as the rupee appreciates against the dollar and other foreign currencies."We enter into forward exchange contracts to minimise the impact of currency fluctuations on our revenues. However, volatility in exchange rate movement and/or sustained rupee appreciation will negatively impact our revenue and operating results," Wipro said in its SEC filing. Noting that about 73 per cent of revenues are earned in foreign currencies and a significant portion of costs are in Indian rupee, Wipro said that appreciation of Indian rupee against major currencies of the world could negatively impact its revenue and operating results. Infosys also said that rupee is its functional currency although it transacts a major portion of its business in other currencies and faces significant forex exposure through its sales in the US and elsewhere. "Accordingly, changes in exchange rates may have a material adverse effect on our revenues, other income, cost of services sold, gross margin and net income, and may have a negative impact on our business, operating results and financial condition," Nasdaq-listed Infosys said. Infosys said it expects a majority of revenues to continue to be generated in foreign currencies, including US dollar, for the foreseeable future and a significant portion of its expenses to be denominated in Indian rupee. "Consequently, the results of our operations are adversely affected as the rupee appreciates against the dollar and other foreign currencies," it warned. "The weakness of the dollar had a material and adverse effect on our operating results in fiscal 2008 and 2007," it said, adding that every percentage point movement in the exchange rate between rupee and dollar affected its operating margins by approximately 0.5 per cent for the year ended March 31, 2008.
