Indian Rupee Rise For 3 Consecutive Weeks Against The Dollar

Indian Rupee Rise For 3 Consecutive Weeks Against The Dollar

20 Mar 2021 11:49 AM

Weekly Synopsis

Indian Rupee

Indian rupee rose for 3 consecutive weeks, supported by persistent equity inflows offsetting rising US Treasury yields. Rupee closed 0.68% higher at 72.51 compared to 73.01 in the previous week. The pair was supported by dollar inflows related to IPOs of companies such as Kalyan Jewellers, Suryoday Small Finance Bank and Nazara Technologies.

India's foreign exchange reserves rose to $582.04 billion as on Mar 12 compared to $580.30 billion at the end of the previous week. The increase was mainly pertaining to an increase in foreign currency assets. RBI also bought net $2.85 billion in the spot foreign exchange market to curb the rupee’s volatility.

Global Market

Dollar advanced on Friday, hitting a more than 1 week high, after the Fed allowed the break on capital requirements lapse, pushing US Treasury yields higher. The Fed announced that it would let the temporary rule directing larger banks to hold more capital against their assets expire on 31 March. The dollar index closed 0.24% higher at 91.906 compared to 91.679 in the previous week.

The U.S. weekly Initial jobless claims unpredictably climbed last week even amid a wave of narrowing social distancing restrictions and improving weather. Initial claims for state unemployment benefits totaled a seasonally adjusted 770,000 for the week ended March 13, from 725,000 in the prior week. Economists polled forecast 700,000 applications in the latest week.

The U.S. homebuilding fell to a six-month low in February as cold hit many parts of the country, in a temporary delay for a housing market that remains buoyed by extremely lean inventories amid strong demand for larger homes. Housing starts dropped 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August.

U.S. producer prices rose in February, leading to the biggest annual profit in nearly 2-1/2 years, but considerable slack in the labor market could make it harder for businesses to pass on the higher costs to consumers. The producer price index for final demand climbed 0.5% last month, with the costs of energy products and food rising. That trailed a rise of 1.3% in January, which was the biggest advance since December 2009.

European The German ZEW headline numbers for March displayed that the Economic Sentiment Index climbed sharply to 76.6 compared to 74.0 expectations and 71.2 previous. While the sub-index Current Conditions figure arrived at -61.0 in March against -62.0 forecasted and -67.2 last. Meanwhile, the Eurozone ZEW Economic Sentiment for March climbed to 74.0 vs. 65.1 expected and 69.6 last.

Inflation in the euro zone, as measured by the Consumer Price Index (CPI), remained unchanged at 0.2% and 0.9% on a monthly and yearly basis, respectively, in February as forecasted. Further details of the report published by Eurostat revealed that the annual Core CPI, which excludes volatile food and energy prices, remained steady at 1.1%.

British consumer morale hit a one-year high this month as the public became confident that an economic recovery from the corona virus pandemic is approaching and that they would benefit directly, a survey showed on Friday. The monthly consumer confidence index from market research firm GfK climbed to -16 from -23 in February. While still some way below its long-run average of -9, the survey showed surging optimism in all of its components.

The Japanese exports dropped in February for the first time in three months as U.S. and China-bound shipments weakened. Ministry of Finance data out on Wednesday showed Japanese exports dropped 4.5% year-on-year in February, hurt by fall in U.S.-bound shipments of automobiles. It was the first decline in three months, following a 6.4% gain in January.

China's factory and retail sector activity rose in the first two months of the year, beating expectations, as the economy consolidated its sharp recovery from the coronavirus paralysis of early 2020. Industrial output climbed 35.1% in the first two months from a year earlier, up from a 7.3% on-year uptick seen in December.

Local Markets

Indian equities gave up losses to close higher on Friday as a pullback in US Treasury yields from 14-month highs restored market’s risk appetite.  The NSE Nifty 50 index closed 1.9% lower at 14,744 compared to 15,030.95 in the previous week and the benchmark S&P BSE Sensex closed 1.8% lower at 49,858.24 compared to 50,792.08 in the previous week. The indices posted their first weekly decline in three amid surging coronavirus cases.

India's Showing healthy signs of revival, India's exports rose 17.27 per cent to USD 14.22 billion during March 1-14 as compared to the year-ago period, according to the commerce ministry's preliminary data. Imports during the period rose 27.77 per cent to USD 22.24 billion, leaving a trade deficit of USD 8.02 billion, the data showed.

Firmer commodity prices drove wholesale inflation in India jumped to an above two-year high in February, official data released Monday showed. The Wholesale Price Index (WPI) inflation was 4.17% in February, higher than 2.03% in January and was led by a rise in fuel and food inflation thereby firming up manufactures’ pricing power. The previous high of 4.47% was in November 2018.