Indian Rupee Ends The Week On A Positive Note

Indian Rupee Ends The Week On A Positive Note

16 Jan 2021 12:34 PM

Weekly Synopsis

Indian Rupee

Indian rupee was higher this week, supported by persistent equity and corporate fund-related dollar inflows. However, bets that the RBI will not allow the Rupee to strengthen above 73 levels limited its upside. The rupee was quoted at 73.07 0.2% higher compared to 73.24 in the previous week.

Data released by the RBI on Friday showed that India’s forex reserves were up by $758 million to reach a record high of $586.082 billion in the week ended 8 January. In the previous week ended 1 January, the reserves had increased by $4.483 billion to $585.324 billion.

Global Market

The U.S. dollar rose to hit a four-week high as data showing the coronavirus pandemic's continuing toll on the economy boosted demand for the safe-haven currency. Dollar index was 0.56% higher at 90.773, on pace to finish the week up 0.8%, its best week in 11 weeks.

Initial claims for jobless benefits surged last week to their highest level in five months as the restrictive measures put in place around the country to stop the coronavirus pandemic continued to take their toll on the U.S. labor market. The Labor Department said 965,000 people filed initial jobless claims last week, up from 784,000 and well above the 795,000 expected.  

 U.S. consumer prices increased in December, with households paying more for gasoline, though underlying inflation remained tame as the economy battled a raging coronavirus pandemic, which has weighed on the labor market and the services industry. The Labor Department said on Wednesday its consumer price index increased 0.4% last month after gaining 0.2% in November.

U.S. consumer sentiment dipped in January as market participants reacted to the assault on the U.S. Capitol and a ruthless surge in coronavirus infections and deaths. The University of Michigan's consumer sentiment index dropped to 79.2 early this month from a final reading of 80.7 in December.  

U.S. manufacturing output increased more than expected in December, but disruptions to the supply chain as the pandemic keeps some workers at home could slow production in the months ahead. Manufacturing production rose 0.9% last month after advancing 0.8% in November. That was the eighth straight monthly gain in factory production.  

The euro zone's trade surplus rose as expected in November despite an economic slowdown and falling trade turnover, due to a better trade balance with Russia, Turkey, Norway, Japan and South Korea. The Eurostat said the trade surplus of the Eurozone with the rest of the world was 25.8 billion euros in November, up from 20.2 billion a year earlier. Both exports and imports fell year-on-year, although, imports declined 4.2% while exports only 1.0%.

U.K. Industrial output dropped 0.1% month-on-month in seasonally-adjusted terms in November. The figure marked the worst since April. November's reading was driven by deteriorations in all subcomponents of the index. On an annual basis, industrial output dropped 4.7% in November.

U.K. GDP decreased 2.6% in November, its worst since April, and was driven by a decline in the services sector. However, GDP fell at a markedly softer rate than market expectations. On a rolling quarterly basis, GDP rose 4.1% in September–November, which was well below August–October’s 10.5% expansion.

Japan's exports rose for the first time in two years in December as overseas demand improved, but a continued surge in coronavirus cases globally and extended lockdowns could hurt shipments in coming months. Exports rose 2.4% in December from a year earlier, which would be the first increase since November 2018. Imports were forecast to have fallen 14.0% in December from a year earlier, which would result in a trade surplus of 9.09 billion.

China’s exports continued to expand at a strong pace in December, helping to underpin the economy’s recovery. Exports grew 18.1% in dollar terms in December from a year earlier, while imports rose 6.5%. That left a trade surplus of $78.17 billion for the month, the highest on record. Economists had forecast that exports would increase by 15% while imports would rise by 5.7%.

Local Market

Indian shares dropped the most in nearly four weeks on Friday, ending down over 1%, as investors locked in profits following the benchmark indexes hitting multiple record highs this week and as a proposed U.S.  stimulus package failed to surprise. The NSE Nifty 50 index closed at 14,433.70, 0.60% higher compared to 14,347.25 in the previous week. The S&P BSE Sensex fell 0.51% to 49,034.67 compared to 48,782.51 in the previous week. The Nifty index rose for a third straight week, while the Sensex gained for an eleventh straight week.

Consumer Price Index inflation eased to 4.59% in December 2020 as compared to 6.93% in November and 7.35% in December 2019. Retail inflation showed signs of easing in December, led by easing prices of some food items.