Indian rupee declined for the 2nd consecutive week

Indian rupee declined for the 2nd consecutive week

24 Jan 2020 06:30 PM

Weekly Synopsis

 Indian Rupee

Indian rupee declined for the second consecutive week against the dollar, as fears about the spread of a virus from China dented investor appetite in the region. The unit depreciated 0.3% this week, logging its biggest decline since week ended Jan. 3. The pair USDINR closes at 71.3250 against the previous weekly close of 71.08 on January 17th, 2020 to a greenback. It trades in a weekly range between 71.34 to 71.03 against the dollar.

India's foreign exchange reserves rose for the 17th straight week to a fresh record high of $462.16 billion as of the week ended Jan. 17, from $461.21 billion at the end of the prior week, according to central bank data released today. The foreign currency assets stood at $428.45 billion against $427.58 billion in the previous week, the data showed.

Global Market

Against a basket of six major currencies, the dollar was flat, trading off two-week lows hit on Thursday. Sterling rose as much as 0.3% to $1.3180 before erasing those gains. It was last down 0.3% at $1.3125. The euro tumbled to a seven-week low against the dollar as the PMI data added to a broader market conviction that European Central Bank policymakers will maintain a loose monetary policy for the near future. The single currency was last at $1.1033.

The number of Americans filing for unemployment benefits increased less than expected last week, suggesting the labor market continues to tighten even as job growth is slowing. Labor market strength is underpinning consumer spending, helping to keep the longest economic expansion on record, now in its 11th year, on track, despite a downturn in manufacturing.

Sales of previously owned U.S. homes jumped in December to the best pace in nearly two years as historically low interest rates continued to lure buyers despite record-low inventory. Contract closings rose 3.6% from the prior month to a 5.54 million annual rate, according to National Association of Realtors data released Wednesday.

Euro zone business activity remained weak at the start of the year, a survey showed a day after the European Central Bank said the manufacturing sector remained a drag on the economy, but there were some signs the worst may be over. IHS Markit's Euro Zone Composite Flash Purchasing Managers' Index (PMI), seen as a good gauge of economic health, held at 50.9 in January, missing the median prediction in a poll for 51.2. Anything above 50 indicates growth.

The European Central Bank left its policy unchanged on Thursday and launched a "strategic review" of its inflation goal and tools."The Governing Council...decided to launch a review of the ECB’s monetary policy strategy. It reaffirmed its pledge to keep rates at rock bottom or even cut them, while also buying bonds at 20 billion euros per month, until inflation in the euro zone headed back to its target of just under 2%.

Euro zone business activity remained lacklustre at the start of the year, a survey showed a day after the European Central Bank said the manufacturing sector remained a drag on the economy. The manufacturing PMI marked the 12th month below the break-even mark, registering 47.8 - albeit an improvement on December's 46.3.

U.K. economic expectations improved in January, with the flash Purchasing Managers Indexes from Markit showing activity rising to a 16-month high. Manufacturing PMI for January came in at 49.8 from 47.5 previously, while the dominant Services PMI was at 52.9 from 50.0. The Composite number came in at 52.4 from 49.3, back in expansionary territory. All the numbers were comfortably ahead of consensus forecasts.

Optimism in British factories hit its highest in almost six years in the three months to January, according to a survey that added to signs of a post-election boost, prompting investors to trim bets that the Bank of England will cut interest rates next week.The Confederation of British Industry's quarterly gauge of manufacturing optimism rose to +23 in January from -44 in October, its highest level since April 2014.

British job growth was the strongest in nearly a year in the three months to November, according to data that could weaken the case for an interest rate cut by the Bank of England next week. Tuesday's reading showed the number of people in employment rose by 208,000 to 32.90 million, the biggest increase since the three months to January 2019.

British households grew more confident about their finances and a measure of house prices rose by a record amount for January. IHS Markit, a data firm, said its Household Finance Index rose to a one-year high of 44.6 in January from 43.2 in December, chiming with other sentiment surveys from both businesses and consumers that have shown an increase in optimism.

Asking prices for U.K. homes increased by the most for any January on record in a sign that the Conservatives’ December election win boosted confidence, according to property website-operator Right move. Values increased 2.3% on the month to an average 306,810 pounds ($400,000) .

Japan's exports fell for a 13th straight month in December, hurt by U.S.-bound shipments of cars, construction and mining machinery, suggesting weak external demand is likely to remain a drag on the trade-reliant economy for a while longer. The 6.3% year-on-year fall in exports was worse than a 4.2% decrease expected by economists in a poll. It followed a revised 7.9% year-on-year decline in the previous month, the Ministry of Finance (MOF) data showed on Thursday.

China has revised up its economic growth by 0.1 percentage points each year between 2014 and 2018, the National Bureau of Statistics said, making it easier for Beijing to fulfill its goal of doubling the size of the economy by 2020 from 2010. Annual gross domestic product (GDP) growth for 2014-2018 has been raised to 7.4%, 7.0%, 6.8%, 6.9% and 6.7% from 7.3%, 6.9%, 6.7%, 6.8% and 6.6% previously, the latest data from the statistical bureau showed on Saturday.

Oil slipped below $62 a barrel on Friday and was heading for a weekly decline as concern that a virus in China may spread, curbing travel and oil demand, overshadowed supply cuts. Global benchmark Brent was down 28 cents to $61.76. The contract is down almost 5% this week, its third consecutive weekly drop. U.S. crude slipped 25 cents to $55.34 and was also on course for a weekly decline.

Local Market

Indian shares ended firmer on Friday, with banking stocks leading gains, as investors assessed a raft of corporate earnings and awaited the release of the federal budget next week. The NSE Nifty 50 Index ended 0.56% higher at 12,248.25, while the S&P BSE Sensex closed down 0.55% at 41,613.19. However, poorly received financial results from a few index heavyweights dragged the Nifty 0.84% lower this week.

Ultratech Cement Ltd, a Nifty component, gained 2.6% after reporting on Friday an increase in its profit for the quarter ended December. The Nifty banking index ended 0.77% firmer, with Kotak Mahindra Bank closing 2.3% higher. Private-sector lender Yes Bank was the top gainer in the index with a 4.5% jump. Yes Bank stock, which rose for the third consecutive session, dropped 9% so far this year.