Indian Rupee fell 0.8% this week

Indian Rupee fell 0.8% this week

05 Jun 2021 12:20 PM

Weekly Synopsis

 Indian Rupee

The rupee logged its first weekly loss in six amid expectations that the across-the-board tumble on forward premiums will impact carry trade flows. The rupee dropped 0.8% this week, falling to 72.9950 from 72.44 last Friday. The local unit lost ground on each day of this week, except Thursday.

India's foreign exchange reserves rose to $598.17 billion as of May 28, compared with $592.89 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 fell on Friday after U.S. nonfarm payrolls data showed hiring increased in May as the pandemic eased, but not as much as expected, tempering expectations the Federal Reserve will tighten monetary policy sooner, rather than later. For the week, Dollar Index was up by 0.1% and closed at 90.13.

U.S. nonfarm payrolls data showed hiring increased in May as the pandemic eased, but not as much as expected, Nonfarm payrolls increased by a solid 559,000 jobs last month, helped by higher COVID-19 vaccination rates, but that was below the consensus forecast for 650,000 jobs added in May.

New orders for U.S.-made goods fell more than expected in April as a global semiconductor shortage weighed on the production of motor vehicles and electrical equipment, appliances and components. The Commerce Department said on Friday that factory orders dropped 0.6% in April after increasing 1.4% in March. Economists polled had forecast factory orders slipping 0.2%.

The number of Americans filing new claims for unemployment benefits dropped below 400,000 last week for the first time since the COVID-19 pandemic started more than a year ago, Initial claims for state unemployment benefits fell 20,000 to a seasonally adjusted 385,000 for the week ended May 29. That was the lowest since mid-March 2020.

British house prices jumped by an annual 10.9%, the most in nearly seven years, Tuesday's figures are the latest to show the scale of the surge in house prices which hit a new record high at an average of 242,832 pounds ($345,355.67), according to Nationwide. Economists polled had expected prices to rise by 9.2% in annual terms.

Japanese companies cut spending on plant and equipment for the fourth straight quarter in January-March, Ministry of Finance (MOF) data out on Tuesday showed capital expenditure in the first quarter fell 7.8% from the same period last year, pulled down by weaker investments in transportation equipment, electrical machinery and real estate.

China's services sector expansion slowed in May, a private sector survey showed on Thursday, with weaker overseas demand and increased costs putting pressure on businesses. The Caixin/Markit services Purchasing Managers' Index (PMI) fell to 55.1 in May, down from 56.3 in April but still well in expansionary territory. 

Local Market

Indian shares closed slightly lower on Friday after the country's central bank kept interest rates unchanged as widely expected and unveiled liquidity support measures, with investors focusing on rising inflationary pressures. For the week, both the indexes rose over 1% to their third straight week of gains. Nifty50 and BSE Sensex ended this week at 15,670.25 and 52,100.05 respectively.

The Reserve Bank of India (RBI) kept interest rates at record lows on Friday and announced additional bond purchases to support the economic recovery, The RBI's monetary policy committee (MPC) voted unanimously to hold the repo rate, its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35% as predicted in a poll.