India Rupee Falls For 6th Week On Trade Woes Global Risk-Off

India Rupee Falls For 6th Week On Trade Woes Global Risk-Off

17 Aug 2019 12:53 PM
 

Weekly Synopsis

 

Indian Rupee

The Indian rupee fell for a sixth week against the dollar, its biggest losing streak since May last year, as trade tensions and global growth concerns kept investors away from risk assets. However, the rupee yesterday closed higher at 71.15 to a dollar, against 71.27 at previous close. The local unit opened at 71.36, but rose to day’s high of 71.05 on dollar sales by foreign banks, likely for exporters. The unit declined 0.5% this week, adding to the 3.4% fall over the last five weeks.

Indian banks' loans rose 12.2% in the two weeks ended Aug 2 from a year earlier, while deposits jumped 10.1%, the Reserve Bank of India's weekly statistical supplement showed on Friday. Outstanding loans rose 711.3 billion rupees to 97.30 trillion rupees ($1.37 trillion) in the two weeks ended Aug 2.Non-food credit surged 743.9 billion rupees to 96.67 trillion rupees, while food credit fell 32.50 billion rupees to 627.50 billion rupees. Bank deposits rose 939.60 billion rupees to 127.45 trillion rupees in the two weeks ended Aug 2.

India's foreign exchange reserves surged by $1.620 billion to $430.572 billion in the week to August 9 on rise in foreign currency assets, according to the latest RBI data released on Friday. In the previous reporting week ended on August 2, the reserves had declined by $697.2 million to $428.952 billion. In the reporting week, foreign currency assets, a major component of the overall reserves, increased by $15.2 million to $398.739 billion.

The Indian government had 856.87 billion rupees ($12.04 billion) outstanding loans with the central bank under ways and means advances in the week ended Aug. 9, according to the Reserve Bank of India's weekly statistical supplement released on Friday. The central government had 1.16 trillion rupees outstanding loans in the week earlier. State governments had loans worth 39.52 billion rupees from the RBI in the week ended Aug.

Global Market

The dollar ended roughly flat on Friday, retracing the morning's move higher, after worries tied to trade tensions and a Federal Reserve rate cut weighed on consumer sentiment and a report that Germany may run a deficit to boost growth lifted the euro. The news lifted the euro against the dollar, but the single currency nevertheless remained 0.14% lower on the day at $1.1091. reversed from over two-week lows to highs of $1.1106 at mid-morning.

U.S. homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Housing starts dropped 4.0% to a seasonally adjusted annual rate of 1.191 million units last month. Data for June was revised down to show starts falling to a pace of 1.241 million units, instead of dropping to a rate of 1.253 million units as previously reported.

U.S. 30-year Treasury yields fell to a record low below 2% and benchmark 10-year notes dropped to a three-year trough on Thursday amid persistent worries about global trade tensions and economic slowdowns around the world. A day after inverting, the U.S. yield curve steepened a little. Curve inversion, which occurs when long-term yields dip below short-term ones.

U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, helping to assuage financial market fears that the economy was heading into recession. The upbeat report from the Commerce Department on Thursday, however, will likely not change expectations that the Federal Reserve will cut interest rates again next month as news from the manufacturing sector remains dour.

U.S. retail sales rose by the most in four months and exceeded projections in July on a surge in online purchases, signaling consumer spending continues to prop up the expansion. The value of overall sales climbed 0.7% after a downwardly revised 0.3% increase in the prior month, according to Commerce Department figures released Thursday.

The number of Americans filing applications for unemployment benefits increased more than expected last week, but the trend continued to point to a strong labor market. Initial claims for state unemployment benefits increased 9,000 to a seasonally adjusted 220,000 for the week ended Aug. 10, the Labor Department said on Thursday.

The U.S. government's deficit widened to $120 billion in July, fueled by increases in spending on health care and the military, according to data released on Monday by the Treasury Department. The Treasury Department said federal spending in July was $371 billion, up 23% from the same month in 2018, while receipts were $251 billion, up 12% compared with July 2018.

British households' expectations for inflation over the next 12 months rose to 2.8% in July from 2.6% in June. Longer-term inflation expectations rose to 3.4% from 3.3% in June. The rate of inflation is the change in prices for goods and services over time. Measures of inflation and prices include consumer price inflation.

Britain's labor market showed unexpected strength in the second quarter but economists said this could prove a high water mark. Average weekly earnings rose by an annual 3.7% in the three months to June - the highest rate since June 2008 and up from 3.5% in May. Excluding volatile bonuses, annual pay growth reached 3.9% - also an 11-year high and beating economists.

Germany’s economy shrunk by 0.1% in the three months to June, caught in the cross-fire of the trade war between U.S. and China. Preliminary figures released on Wednesday by the state statistics office Destatis also showed that the annual rate of growth in Europe's largest economy slowed to zero, the worst performance since 2013.Gross domestic product still rose 0.4% on the year when adjusted for the lower number of working days this year.

The euro zone's GDP barely grew in the second quarter of 2019, data showed on Wednesday. European Union statistics office Eurostat said gross domestic product growth in the 19-country euro zone was 0.2% in the second quarter versus the previous quarter, a slowdown from 0.4% percent in the first three months of 2019.German GDP fell 0.1% quarter-on-quarter. The annual growth rate in Europe's largest economy slowed to 0.4% in the second quarter from 0.9% in the first.

U.S. import prices unexpectedly rose in July, but the underlying trend continued to be weak, pointing to subdued imported inflation pressures. The Fed lowered its short-term interest rate by 25 basis points last month for the first time since 2008, citing trade tensions and slowing global growth.

Local Market

Indian shares ended a tick higher on Friday, powered by gains in banking stocks, but finished lower for the week with trading dominated by headlines about the Sino-U.S. trade conflict and fears of an imminent global recession. The benchmark NSE index ended 0.17% higher at 11,047.80, while the benchmark BSE index closed 0.10% firmer at 37,350.33. The NSE and BSE indexes shed 0.55% and 0.61% respectively during the three-day week, which had two market holidays.

The Nifty bank index ended 0.71% higher, led by a roughly 4% gain each in Punjab National Bank and Yes Bank Ltd. Meanwhile, shares in oil-to-telecom conglomerate Reliance Industries Ltd climbed 10% during the week, their best weekly performance since July 2018. Reliance unveiled the sale of a portion of its oil-to-chemicals business to Saudi Aramco and introduced new high-speed internet services.

Russia and China have stuck with Venezuela during its most recent time of need, but at least one of their loyalties may soon come to an end. CPNC’s Petro China has canceled loading plans in August that would have seen 5 million barrels of Venezuelan oil, the sources said, as the United States continues to squeeze Venezuela to loosen Nicolas Maduro’s hold on the troubled Latin American Country.