Indian Rupee fell 0.2pct on a weekly basis

Indian Rupee fell 0.2pct on a weekly basis

18 Jan 2020 04:21 PM

Weekly Synopsis

Indian Rupee

Indian rupee fell this week against the dollar as consistent demand for the greenback from importers outweighed the optimism stemming from the Sino-U.S. phase-one trade deal. The unit fell 0.2% this week, after gaining 1.2% in the previous week. The pair USDINR closes at 71.08 against the previous weekly close of 70.9375 on January 10th, 2020 to a greenback. It trades in a weekly range between 71.09 to 70.73 against the dollar.

India's foreign exchange reserves rose to $461.21 billion as of Jan. 10 from $461.16 billion a week earlier, the Reserve Bank of India (RBI) 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.

India's merchandise exports shrank 1.8% in December, falling for the fifth straight month, while the trade deficit narrowed to $11.25 billion from a year ago, helped by lower oil imports, the Trade Ministry said in a statement said on Wednesday. Merchandise exports fell to $27.36 billion in December compared with a year earlier, while imports were down 8.83% to $38.61 billion, the data showed. India's trade deficit stood at $14.49 billion in December 2018, the statement said.

India's Wholesale price-based inflation rose to 2.59 percent in December against a rise of 0.58 percent in November. The rate of price rise for food articles rose to 11.46 percent in December against 11 percent in November while, for non-food articles, it increased to 7.72 percent in December against 1.93 percent in November, according to the data released by the Ministry of Commerce and Industry on January 14.

Data released on 13 Jan 2020 revealed that India’s retail prices last month grew at the fastest pace since July 2014. The retail inflation rate accelerated to 7.35% in December from a year earlier, up from 5.54% in the prior month and well ahead of 6.20% median forecast in a survey of economists. The jump in inflation was primarily on account of costlier food. Retail food prices jumped 14.12% from a year earlier in December.

Global Market

The dollar advanced Friday as bullish housing data offset weaker labor data, adding to growing expectations that the U.S. economy will continue to expand. The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.30% to 97.61.

U.S. consumer sentiment remained elevated in January as record stock prices and a strong job market buoy Americans, suggesting spending will continue its steady gains. The University of Michigan's preliminary sentiment index for January edged down to 99.1 from a seven-month high of 99.3 in December, data showed Friday. The gauge of current conditions increased slightly to 115.8 while the expectations index ticked down to 88.3.

U.S. manufacturing output rose unexpectedly in December as a drop in motor vehicle output was outpaced by increases in production of other durable goods, food and beverages, and other products. The Federal Reserve said on Friday that manufacturing production rose 0.2% last month after a downwardly revised 1.0% increase in November. Overall industrial output fell 0.3% in December after a downwardly revised increase of 0.8% in November.

Germany imported 40.2 million tonnes of hard coal last year, 14.7% less than in 2018 due to competition from renewables and gas, and as the steel industry curbed usage, importers said on Fridayan improved reading of 45.9.

U.K. retail sales disappointed again in December dropping 0.6%, adding further force to arguments for an interest rate cut from the Bank of England at the end of the month. Total retail sales were up 0.9% over the year in the reported month, a lot weaker than the 2.6% gain expected.

China’s economy grew 6.1% in 2019, the lowest rate of growth since 1990, according to gross domestic product (GDP) growth data released by the National Bureau of Statistics Friday morning. The rate is lower than the expected 6.2% but still within the 6% to 6.5% target the central government had set in early 2019. The world’s second-largest economy grew 6.6% in 2018.

Real estate investment in China rose 9.9% in 2019 from a year earlier, slowing slightly from a 10.2% gain in the first 11 months of the year, official data showed on Friday. Property sales by floor area eased 0.1% year-on-year in 2019, after rising 0.2% in January-November, data from the National Bureau of Statistics showed.

The U.S. Labor Department's Bureau of Labor Statistics (BLS) on Thursday announced changes to economic data "lockup" procedures, which would result in the removal of computers from its Washington newsroom effective March 1.

U.S. business inventories fell by the most in more than 2-1/2 years in November as sales rebounded, suggesting inventory investment could be a drag on economic growth in the fourth quarter. The Commerce Department said on Thursday that business inventories dropped 0.2%, the biggest decline since April 2017, after edging up 0.1% in October. Inventories are a key component of gross domestic product.

U.S. holiday sales rose 4.1% in 2019 from a year earlier, as steady wage and jobs growth encouraged shoppers to splurge on groceries, beverages and furniture, the National Retail Federation (NRF) said  on Thursday. The U.S. retail group said holiday sales, excluding automobile dealers, gasoline stations and restaurants, rose to $730.2 billion.

U.S. retail sales increased for a third straight month in December, with households buying a range of goods even as they cut back on purchases of motor vehicles, suggesting the economy maintained a moderate growth pace at the end of 2019.

U.S. import prices increased in December, leading to the first year-on-year increase in nine months, but the underlying trend remained weak, consistent with subdued imported inflation. The Labor Department said on Thursday import prices rose 0.3% last month, lifted by gains in the costs of petroleum products. Data for November was revised down to show import prices edging up 0.1% instead of gaining 0.2% as previously reported. Import prices exclude tariffs.

The number of Americans filing for unemployment benefits fell more than expected last week, pointing to sustained labor market strength despite a recent slowdown in job growth. Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 204,000 for the week ended Jan. 11, the Labor Department said on Thursday.

Britain's housing market got a boost from Prime Minister Boris Johnson's big election win in December, a survey showed on Thursday, a pick-up that will be noted by the Bank of England as it considers whether to cut interest rates this month. Agreed home sales rose for the first time since May and expectations of future sales both jumped, according to the report by the Royal Institution of Chartered Surveyors (RICS).

New bank lending in China hit a record of 16.81 trillion yuan ($2.44 trillion) in 2019 as the central bank eased policy to support the world's second-largest economy hobbled by weak global demand and the Sino-U.S. trade war.The central bank has cut borrowing costs to shore up business activity and more monetary easing and fiscal stimulus is expected this year to spur growth.

The Bank of England warned on Thursday that it could force banks and insurers to hold more capital or use other "supervisory tools" as market momentum for ditching the tarnished Libor interest rate benchmark shows signs of flagging. Banks were fined around $9 billion for trying to rig Libor and regulators say it must be scrapped by the end of 2021 because it is based on too few transactions.

China home-price growth accelerated for the first time in seven months, as authorities took steps to ease some property curbs and head off a broader downturn. New-home prices, excluding state-subsidized housing, rose 0.35% last month from November in 70 major cities, National Bureau of Statistics data showed Thursday.

Japan's core machinery orders posted record monthly growth in November, in a bright sign for business spending which has helped sustain a fragile recovery in the world's third-largest economy. Cabinet Office data on Thursday showed that core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 18.0% in November from the previous month.

Japanese manufacturers remained in a pessimistic mood in January as Sino-U.S. trade frictions and sluggish global demand weighed on the export-reliant economy, the Reuters Tankan survey showed. But some believed conditions would improve in the next few months, according to the monthly poll.

U.S. producer prices edged up in December as a rise in the cost of goods was offset by weakness in services, the latest indication of tame inflation pressures that could allow the Federal Reserve to keep interest rates unchanged this year. The report from the Labor Department on Wednesday came in the wake of data on Tuesday showing a small rise in consumer prices in December.

The U.S. economy expanded at a modest pace through the final six weeks of 2019 but uncertainty over U.S. trade policy continued to hurt firms, a survey conducted by the Federal Reserve said on Wednesday. "In many districts, tariffs and trade uncertainty continued to weigh on some businesses," the Fed said in its report, compiled from anecdotal evidence derived from business contacts across the country.

The U.K. economy unexpectedly shrank ahead of the general election, casting doubt over whether there was any growth at all in the fourth quarter. Gross domestic product fell 0.3% in November, the Office for National Statistics said Monday. Economists had expected unchanged output. It means growth of 0.1% to 0.2% was needed in December to prevent the economy contracting in the fourth quarter.

The German economy grew by 0.6% in 2019, the weakest expansion rate since 2013 and a marked cooling from the previous year, as export-dependent manufacturers in Europe's largest economy faced increased headwinds from trade disputes and less foreign demand. The preliminary estimate, released on Wednesday by the Federal Statistics Office, was in line with a poll of analysts and followed gross domestic product (GDP) growth of 1.5% in 2018.

British inflation sank unexpectedly to a more than three-year low in December as hotels slashed prices, ramping up expectations that the Bank of England will cut interest rates as soon as this month. Consumer prices rose by 1.3% in annual terms compared with 1.5% in November, the smallest increase since November 2016, the Office for National Statistics (ONS) said on Wednesday.

Sentiment among U.S. small businesses unexpectedly cooled at the end of 2019 after climbing to a four-month high in November. The National Federation of Independent Business’s index of optimism fell to 102.7 in December from 104.7 a month earlier. The median forecast in a survey of economists called for a reading of 104.6. Six of the report’s 10 components declined, led by a gauge of earnings and several measures related to the labor market.

Oil prices steadied on Friday as sluggish economic growth in China, the world's biggest crude importer, raised concerns over fuel demand and countered optimism from the signing of a China-U.S. trade deal. Brent crude futures rose 23 cents to settle at $64.85 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 2 cents to settle at $58.54 a barrel. For the week, Brent fell 0.2%, while WTI lost 0.8%.

U.S. stocks were higher after the close on Friday, as gains in the Telecoms, Utilities and Technology sectors led shares higher. At the close in NYSE, the Dow Jones Industrial Average added 0.17% to hit a new all time high, while the S&P 500 index added 0.39%, and the NASDAQ Composite index gained 0.34%.

Local Market

Indian shares ended little changed on Friday as losses in telecom and banking stocks offset strength in conglomerate Reliance Industries Ltd ahead of its quarterly earnings. The NSE Nifty 50 Index settled 0.03% lower at 12,352.35, while the S&P BSE Sensex index closed up 0.03% at 41,945.37. Both indexes finished the week 0.8% higher.

Vodafone Idea Ltd plunged 25.8% on its worst day since July last year, while telecom tower company Bharti Infratel Ltd sank 11.1% and was the worst performer on the Nifty. Banks with exposure to the vulnerable telecom companies also took a hit, with Yes Bank Ltd, IndusInd Bank Ltd and State Bank of India slipping between 1.6% and 2.5%. Bharti Airtel Ltd, which must pay roughly $3 billion under the ruling, rose 5.5% and was the top gainer across the indexes on hopes of benefiting from further consolidation in the telecom sector. Reliance Industries rose 2.8%.