Indian Rupee Depreciated 2.2% This Week

Indian Rupee Depreciated 2.2% This Week

10 Apr 2021 12:38 PM

Weekly Synopsis

 Indian Rupee

The Indian rupee ended the first trading week of the new fiscal on a dismal note, logging its steepest fall against the dollar in seven years, The local unit had earlier fallen to 74.95, the lowest since Aug. 21 on the back of dollar buying by a large corporate and two large foreign banks. For the week, the local unit fell 2.2%, its biggest weekly fall since Aug. 30, 2013.

India's foreign exchange reserves fell to $576.87 billion as of April 2, compared with $579.29 billion a week earlier, the Reserve Bank of India said on Friday. Changes in foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of other currencies held in its reserves.

Global Market

The dollar edged higher against a basket of currencies on Friday, paring some of the week's losses, as a stronger-than-expected rise in U.S. and Chinese inflation gauges drove up bond yields. Despite Friday's gains, the dollar index was down by 0.8% this week and closed at 92.19 against the previous week close of 92.98.

U.S. producer prices increased more than expected in March, resulting in the largest annual gain in 9-1/2 years and likely marking the start of higher inflation as the economy reopens amid an improved public health environment and massive government aid. The producer price index for final demand jumped 1.0% last month as costs increased across the board. The PPI rose 0.5% in February.

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, Initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 744,000 for the week ended April 3 compared to 728,000 in the prior week.

The U.S. trade deficit surged to a record high in February as the nation's economic activity rebounded more quickly than that of its global rivals and could remain elevated this year, The trade deficit jumped 4.8% to a record $71.1 billion in February, the Commerce Department said on Wednesday. Economists polled by Reuters had forecast a $70.5 billion deficit. The goods trade gap was also the highest on record.

Euro zone business activity bounced back to growth last month, underpinned by a record expansion in manufacturing, according to a survey on Wednesday that also showed the service industry was coping better than expected with new lockdowns. A composite PMI, combining manufacturing and services and seen as a good gauge of economic health, rose to 53.2 from 48.8, above the 52.5 preliminary estimate.

British businesses saw a strong rebound in orders in March as they prepared for the relaxation of coronavirus restrictions this month, and ramped up their hiring for the first time since the pandemic struck, a survey showed. The IHS Markit/CIPS composite Purchasing Managers' Index - measuring Britain's huge services sector and its manufacturers - jumped to 56.4 from 49.6 in February.

Japan's real wages rose for the first time in a year in February, largely due to prices weakening as the coronavirus pandemic continued to weigh on the economy. Inflation-adjusted real wages, a key measure of households' purchasing power, rose 0.2% in February compared with the same month a year earlier, the labour ministry said on Tuesday.

A recovery in China's services sector picked up speed in March as firms hired more workers and business optimism surged, although inflationary pressures remained, a private sector survey showed on Tuesday. The Caixin/Markit services Purchasing Managers' Index (PMI) rose to 54.3, the highest since December, from 51.5 in February.

Local Market

Indian shares closed lower on Friday, pressured by modest declines in index heavyweights Reliance Industries and ICICI Bank, while Hindustan Unilever gained on signs that coronavirus curbs could spur greater demand for daily-use consumer products. For the week, Nifty was down by 0.2% and closed at 14,834.85 compare to the previous week close of 14,867.35.

Foreign investors bought net $280.15 million of Indian shares on Apr. 8, according to data from the National Securities Depository Ltd. In April so far, these investors bought net $145.55 million of Indian shares.