India Rupee Gains For 3rd Week On Govt's Foreign Borrowing Remarks

India Rupee Gains For 3rd Week On Govt's Foreign Borrowing Remarks

06 Jul 2019 02:04 PM

Weekly Synopsis


Indian Rupee

Indian rupee gained for the third week running against the dollar, as the government’s plan for overseas borrowing in foreign currency reinforced the chief economic advisor’s earlier remarks, The rupee ended at 68.42 to a dollar, its highest since Apr.03. The pair USDINR closes at 68.42 against the previous weekly close of 69.0150 on June 28th,2019 to a greenback. It trades in a weekly range between 69.0850 to 68.42 against the greenback. The rupee gained 0.9% this week, adding to its rise of 1.1% during the last two weeks.

India's decision to slightly lower its fiscal deficit target for 2019/20 is a step in the right direction but will be challenging to achieve, India's finance minister said the government would cut its fiscal deficit target to 3.3% of gross domestic product (GDP) for the year ending March 2020, from 3.4% set in February, and said it would achieve 3% by March 2021.

India Prime Minister Narendra Modi's government unveiled the budget for 2019/2020 on Friday, seeking to reverse weakening growth and investment that threaten to take the shine off a recent landslide election victory. Modi has set a target of growing India into a $5 trillion economy by 2024/2025 from $2.7 trillion that a government report on Thursday said will be done on the back of higher investment.

The Indian government had 65.96 billion rupees ($964.20 million) outstanding loans with the central bank under ways and means advances in the week ended June 28.State governments had 16.61 billion rupees loans from the RBI in the week ended June 28, compared with 1.63 billion rupees in the previous week.

Global Market

The U.S. dollar jumped on Friday after the economy added more jobs than expected in June, dampening expectations that the Federal Reserve will cut rates aggressively to stave off a slowdown. The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, jumped 0.7% to a three-week high of 96.968.

U.S. construction spending unexpectedly fell in May as investment in private construction projects dropped to its lowest level in nearly 2-1/2 years. The Commerce Department said on Monday construction spending declined 0.8%, the biggest drop since last November. Data for April was revised to show construction outlays rising 0.4% instead of being unchanged as previously reported.

The U.S. economy's manufacturing sector expanded in June but at a slower pace than the previous month and the slowest pace overall since October 2016.The Institute for Supply Management said its index of national factory activity fell to 51.7 from 52.1 the month before. The employment index rose to 54.5 from 53.7 a month earlier. Expectations called for a reading of 52.8.

U.S. Neighbourhood and community shopping center retail vacancy rate fell 0.1% to 10.1% in the second quarter, marking the first decline since the beginning of 2016.Grocery stores have been a leading new occupant of those vacant spaces over the past year or so, along with discount clothing stores and even trampoline parks.

U.S. office vacancy rate rose by 0.2% to 16.8% in the second quarter from a year earlier, amid a slowing U.S. economy and ongoing trade tensions with China. Acancy increased in 43 of 79 metros in the quarter, higher than most quarters. Despite a healthy job market and strong overall economy, the office market has moved and continues to move at a sluggish pace.

The number of Americans filing applications for unemployment benefits fell more than expected last week, pointing to sustained labor market strength that should help support a slowing economy. Initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 221,000 for the week ended June 29, the Labor Department said on Wednesday. Data for the prior week was revised to show 2,000 more applications received than previously reported.

U.S. mortgage applications were little unchanged last week . The Washington-based industry group's seasonally adjusted index on mortgage activity dipped 0.1% at 518.1 in the week ended June 28,or loans whose balances are $484,350 or less, edged up to 4.07% from prior week's 4.06%, which was the lowest level since September 2017.

The U.S. trade deficit jumped to a five-month high in May as imports of goods increased. The Commerce Department said on Wednesday the trade deficit surged 8.4% to $55.5 billion. Data for April was revised higher to show the trade gap widening to $51.2 billion instead of the previously reported $50.8 billion.

The U.S. economy created many more jobs than expected in June, putting a dent in the case for an immediate interest rate cut from the Federal Reserve. Nonfarm payrolls rose by 224,000 in June, well above consensus expectations for 160,000 and a sharp rebound from a downwardly-revised 72,000 in May.

British employers and shoppers are turning increasingly cautious, indicators showed on Friday, suggesting two of the drivers of the economy during the Brexit crisis are losing momentum. In a week when business surveys pointed to a contraction in overall output in the second quarter, the latest signals from Britain's boardrooms and high streets underscored the extent of the slowdown following a strong start to 2019.

British house prices rose at the fastest annual rate since early 2017 in the three months to the end of June. House prices were up by 5.7% in the three months to June compared with the same period a year ago after rising by 5.2% in the three months to May. The annual increase was flattered by weak price growth in the corresponding period in 2018. In monthly terms, prices fell by 0.3% after a rise of 0.4% in May.

German industrial orders fell far more than expected in May, data showed on Friday, and the Economy Ministry warned that this sector of Europe's largest economy was likely to remain weak in the coming months. Contracts for 'Made in Germany' goods were down by 2.2% compared to the previous month, the Economy Ministry said.

Euro zone retail sales fell in May. The EU statistics office Euro stat said high-street sales in the 19 countries sharing the euro dropped 0.3% in May compared with April, below the average forecast of a 0.3% .Year-on-year, retail trade rose by 1.3% in the euro zone, slightly less than market expectations of a 1.6% rise.

Euro zone business activity picked up slightly last month but remained weak as a modest but broad-based upturn in the services industry offset a continued deep downturn in factory output. The ECB will either cut its deposit rate or ease its forward guidance further by pledging to keep interest rates lower for longer.

Factory activity in the euro zone shrank faster last month than previously thought in a broad-based downturn.IHS Markit's June final manufacturing Purchasing Managers' Index was 47.6, below an earlier flash reading of 47.8 and May's 47.7, marking its fifth month below the 50 level separating growth from contraction.

The year’s biggest events for oil more OPEC production cuts and a possible resolution to the trade war have delivered more disappointment than joy for oil bulls this week. Oil prices moved higher in New York and London in light trading as U.S. markets reopened from the U.S. Independence Day holiday. New York-traded WTI settled up 17 cents, or 0.3%, to $57.51 per barrel by. WTI fell about 1% on Thursday in UK and Asian trading. London-traded Brent, the benchmark for oil outside of the U.S., rose 93 cents, or 1.5%, to $64.23. Brent had settled down nearly 1% in the previous session. For the week, however, WTI fell 1.6%, its sharpest slide in 3 weeks. Brent slid 0.8%.

Local Market

Indian shares fell on Friday after Finance Minister Nirmala Sitharaman proposed increasing the minimum public shareholding in listed companies to 35% from 25%, threatening a wave of new issuance. The broader NSE index closed down 1.14% at 11,811.15 points, while the BSE index settled 0.99% lower at 39,513.39. Eight of the 11 sector indexes compiled by the NSE closed in the red, while 16 of the 19 sector indexes compiled by BSE ended lower.

Yes Bank, NTPC, UPL, M&M and Vedanta were biggest losers among Nifty50 stocks, down 4-8 percent while Indiabulls Housing, IndusInd Bank, Kotak Mahindra Bank and SBI gained 1-3 percent. Nifty Midcap index fell 1.7 percent. Escorts, Adani Enterprises, Jain Irrigation, Allahabad Bank, BEL, DLF and InterGlobe Aviation fell sharply while ICICI Prudential gained a percent.