Indian rupee fell for a seventh week

Indian rupee fell for a seventh week

23 Aug 2019 07:03 PM

Weekly Synopsis


Indian Rupee

Indian rupee fell for a seventh week against the dollar to post its biggest losing streak in nearly four years, as the yuan plunged to multi-year lows. The currency fell 0.7% this week and is down by 4.7% over the last seven weeks. The pair USDINR closes at 71.66 against the previous weekly close of 71.15 on August 16th, 2019 to a greenback. It trades in a weekly range between 71.05 to 72.0475 against the dollar.

India's foreign exchange reserves slipped to $430.50 billion, as of Aug. 16, compared to $430.57 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.

Most Asian units tumbled this week on the back of a plunge in the yuan to over 11-year lows on mounting trade tensions and worries over China’s economic outlook. The on-shore yuan shed 0.6% this week and is on track to post its biggest monthly fall since July 2018.

Global Market

The dollar was broadly higher in early trading in Europe Friday in generally quiet trading ahead of a keenly-awaited speech by Federal Reserve Chairman Jerome Powell. the dollar index, which tracks the greenback against a basket of currencies, was up some 0.2% from late Thursday’s levels at 98.222, with its biggest gains coming against the lower-yielding yen and Swiss franc.

The Chinese yuan slid to a new 11-year low for the second day in a row, while sterling defended the gains it made in a short squeeze on Thursday on the positive spin coming out of Prime Minister Boris Johnson’s meetings with German Chancellor Angela Merkel and French President Emmanuel Macron.

The number of Americans filing applications for unemployment benefits fell sharply last week, suggesting the labor market was holding firm despite a manufacturing slowdown and concerns the economy is on a path toward recession. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 209,000 for the week ended Aug. 17, the Labour Department said on Thursday.

U.S. manufacturing industries recorded their first month of contraction in almost a decade amid concern about whether the U.S.-China trade conflict. IHS Markit said its "flash" or preliminary measure on domestic factory activity fell to 49.9 in August, its lowest level since September 2009. This compared with a final reading of 50.4 the month before.

British retail sales plunged in August at the fastest pace since December 2008, according to a survey published on Thursday. The Confederation of British Industry's gauge of retailers - or the difference between those reporting rising and falling sales volumes - slumped to -49 in August from -16 in July, the second weakest reading since records began in 1983.

Euro zone business growth picked up a touch in August. IHS Markit's Euro Zone Composite Flash Purchasing Managers' Index (PMI), seen as a good guide to economic health, climbed in August to 51.8 from 51.5 in July and above 51.2 predicted in a poll. Anything above 50 indicates growth. The composite future output index measuring overall business optimism sank to 55.5, its lowest since May 2013, from 58.8 in July.

Germany's private sector continued to struggle in August as a manufacturing recession dragged on and activity in the services sector eased slightly, a survey showed on Thursday. Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, edged up to 51.4 from 50.9 the previous month.

Federal Reserve policymakers highlighted concerns about slowing global growth and trade tensions as headwinds, but stopped short of suggesting that a series of rate cuts should follow, according to the minutes of the Federal Reserve’s July meeting released Wednesday.

U.S. home sales rose more than expected in July. The National Association of Realtors said existing home sales rose 2.5% to a seasonally adjusted annual rate of 5.42 million units last month. June's sales pace was revised slightly higher to 5.29 million units from the previously reported 5.27 million units. Economists poll had forecast existing home sales would rise to a rate of 5.39 million units in July.

The downturn in British manufacturing eased off a little in August, although the slowdown in the global economy and the Brexit crisis mean a recovery still looks a way off, a survey showed on Tuesday. The Confederation of British Industry's (CBI) monthly order book balance rose to -13 from -34 in July. A poll of economists had pointed to a weaker reading of -23 in August.

Euro-area inflation was weaker than initially reported in July, raising pressure on European Central Bank policy makers to consider more stimulus in September. Eurostat revised its July estimate for consumer price growth to 1%, down from a reading of 1.1% reported on July 31. It’s the second consecutive revision to inflation data.

British working-age households are growing more cautious about making major purchases amid concerns about Brexit and a possible recession, a monthly consumer survey showed on Monday. The IHS Markit Household Finance Index dropped to a three-month low of 43.7 in August from 44.3 in July, and households' appetite to make major purchases fell at the second-fastest rate since September 2017.

Oil prices edged lower on Friday but remained on track for a weekly gain. Brent crude futures, the international benchmark for oil prices, fell 23 cents to $59.69 a barrel but was up about 1.7% on the week. U.S. West Texas Intermediate (WTI) crude futures slipped by 12 cents to $55.23, up 0.6% this week.

German Chancellor Angela Merkel's comments on Thursday that a solution to the Irish border question could be found before Oct. 31, the deadline for Britain to leave the EU, triggered the biggest one-day gain in the pound against the dollar since May. Against the euro, sterling gained the most in five months.

Local Market

Indian shares rebounded to end higher on Friday, after three sessions of declines. The broader NSE index closed up 0.82% at 10,829.35, while the benchmark BSE index ended 0.63% higher at 36,701.16. The NSE index closed 1.98% lower for the week, as trading was dominated by global economic slowdown worries as well as investor concerns about India's fiscal stimulus.

India has decided to withdraw higher tax surcharge on foreign portfolio investors, Finance Minister Nirmala Sitharaman said today, as New Delhi sought to calm those, who spooked by a budget proposal of a higher levy, have been dumping local stocks that sparked an outflow rush.