Indian rupee depreciated 0.08% this week

Indian rupee depreciated 0.08% this week

07 Feb 2020 07:43 PM

Weekly Synopsis

 Indian Rupee

The Indian rupee fell against the U.S. currency this week as the dollar index jumped on the back of positive data releases throughout the week. Indian rupee closed this week at 71.40, previous week it closed at 71.34.Rupee depreciated 0.08% this week.

India's foreign exchange reserves rose for the 19th straight week to a fresh record high of $471.30 billion as of the week ended Jan. 31, from $466.69 billion at the end of the prior week, according to central bank data released today. The reserves gained $4.61 billion, logging its biggest rise since week ended on Sep. 27.

Global Market

The dollar index is headed to post its best week since week ended Aug. 30 after better-than-expected U.S. data including manufacturing, services, and private payroll addition. The index traded near a four-month-high at 98.57, up 0.1% for the day, ahead of a key jobs report. Dollar index closed last week at 97.37.

U.S. job growth likely picked up in January, with unseasonably mild temperatures seen boosting hiring in the weather-sensitive sectors, indicating the economy will probably continue to grow moderately despite a deepening slump in business investment. The Labor Department's closely watched monthly employment report on Friday is, however, expected to show job gains from April 2018 through March 2019.

The number of Americans filing for unemployment benefits dropped to a nine-month low last week, suggesting a tightening labor market would continue to keep the longest economic expansion in history on track despite weak business investment. The unemployment benefits decreased 15,000 to a seasonally adjusted 202,000 for the week ended Feb. 1, the lowest reading since last April.

U.S. worker productivity rebounded in the fourth quarter, keeping labor costs in check. The Labor Department said on Thursday nonfarm productivity, which measures hourly output per worker, increased at a 1.4% annualized rate last quarter. Productivity decreased at an unrevised 0.2% pace in the July-September period, the biggest drop since the fourth quarter of 2015.

The U.S. trade deficit fell for the first time in six years in 2019 as the White House's trade war with China curbed the import bill, keeping the economy on a moderate growth path despite a slowdown in consumer spending and weak business investment. The trade deficit dropped 1.7% to $616.8 billion last year, declining for the first time since 2013. That represented 2.9% of GDP, down from 3.0% in 2018.

U.S. services sector activity picked up in January, with industries reporting increases in new orders, suggesting the economy could continue to grow moderately this year even as consumer spending is slowing. The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index increased to a reading of 55.5 last month, the highest level since August. Data for December was revised slightly down to show the index at a reading of 54.9 instead of the previously reported 55.0.

U.S. factory activity unexpectedly rebounded in January after contracting for five straight months amid a surge in new orders, offering hope that a prolonged slump in business investment has probably bottomed out. A rebound in business investment is critical to keeping the longest economic expansion in history, now in its 11th year, on track amid signs of fatigue in consumer spending. The ISM said its index of national factory activity increased to a reading of 50.9 last month, the highest level since July, from an upwardly revised 47.8 in December.

Euro zone business activity accelerated last month, a survey showed on Wednesday, the latest piece of evidence to suggest the worst may be over for the bloc's economy. IHS Markit's final euro zone composite Purchasing Managers' Index (PMI), seen as a good indicator of economic health, rose to a five-month high of 51.3 in January from December's 50.9.

Euro zone producer prices fell in December on the year for the fifth consecutive month but their drop was slower than in November, estimates from the EU statistics office showed on Tuesday. Eurostat said prices at factory gates in the 19 countries sharing the euro dropped by 0.7% year-on-year in December, after a 1.4% plunge in November, in line with market expectations.

Euro zone factory activity contracted again in January but did so at its shallowest rate since mid-2019, according to a survey which suggested the worst may be over for the bloc's battered manufacturing industry. IHS Markit's final manufacturing Purchasing Managers' Index rose to a nine-month high of 47.9 in January, just above a preliminary reading of 47.8 and edging closer to the 50 mark that separates growth from contraction. It was 46.3 in December.

British retailers had their biggest increase in sales in six years in January as Prime Minister Boris Johnson's sweeping election win and price-cutting encouraged consumers to spend more, a survey showed on Friday. Accountancy firm BDO said its High Street Sales Tracker found sales jumped by 5.7% last month, the biggest annual rise since January 2014, with gains seen across all sectors.

British new car registrations in January fell 7.3% year on year to 61,717, reversing a pick-up in late December, industry figures showed on Wednesday. The fall was led by a drop of nearly 14% in private consumers' car purchases, while business sales were more resilient.

Britain's manufacturing sector emerged from its longest decline since the financial crisis last month, after a boost from December's election result, The IHS Markit/CIPS purchasing managers' index (PMI) rose to the no-change level of 50.0 from 47.5 in December, slightly stronger than an earlier "flash" reading for January of 49.8

Japanese household spending fell at a much faster pace than expected in December, sliding for the third straight month in a sign consumers are having a hard time coping with a sales tax hike gauge was 54.1, compared with 53.5 the previous month. Household spending slipped 4.8% in December from a year earlier, government data showed on Friday, coming in well below a median forecast for a 1.7% decline.

Japan's services sector returned to growth in January, as new business expanded at the fastest pace in seven months in a sign consumers may be gradually adjusting to a sales tax hike that had chilled spending. The final seasonally adjusted Jibun Bank Japan Services Purchasing Managers' Index (PMI) rose to 51.0 in January from a more than three-year low of 49.4 in December, but below a preliminary reading of 52.1.

China's exports and imports likely fell in January after a brief rebound at the end of last year. Exports from the world's second-largest economy are expected to have dropped 4.8% in January from a year earlier, according to a median estimate from the survey of 18 economists, Imports likely fell 6% from a year earlier in January, a sharp contrast with 16.5% growth in the previous month.

Growth in China's services sector slowed for a second straight month in January, a traditionally busy sales season, hitting a three-month low as companies cut prices and new orders dipped. The Caixin/Markit services purchasing managers' index (PMI) slowed to 51.8 last month from 52.5 in December, but was still higher than an 8-month low hit in October.

Local Market

The broader NSE Nifty 50 index .NSEI fell 0.33% to 12,098.35 and the benchmark S&P BSE Sensex index .BSESN ended 0.4% lower at 41,141.85. However the Nifty and Sensex finished the week up 1.04% and 1.03%, respectively, their best weekly close since Dec. 20. Nifty closed last week at 11,962 while sensex closed last week at 40,723.

The Nifty auto index .NIFTYAUTO closed down 0.95% and was the top drag among sectors. The Nifty financials index .NIFTYFIN dropped 0.3%. Eicher Motors EICH.NS was the day's biggest laggard, dropping 3.21%, while Zee Entertainment ZEE.NS was the top gainer, advancing 5.92%.