Aug 10 2018

Indian Rupee survives Russian Rouble & Turkish Lira collapse

Weekly Synopsis

10th August, 2018

Markets from 06th August 2018 to 10th August 2018

 

Rupee:-

  • The Indian rupee posted the biggest weekly fall in three weeks against the dollar, as escalating trade worries between the U.S. and China kept investors away from emerging. The rupee closes on Friday at 68.8250 against the previous weekly close of 68.6050 on July 03rd, 2018 to a greenback. It trades in a weekly range between 68.45 to 69.02 against the greenback. On a weekly basis, the rupee fell 0.3%, snapping last two weeks’ gains and marking its biggest weekly decline since week ended on Jul. 20.

 

Local Markets:-

  • Indian shares ended on Friday 0.41% lower, coming off yesterday’s record high. The market managed to snap its 5-day winning streak, but investors could make peace with the fact that the Nifty has held 11,400. For the week, Sensex was higher by 0.8 percent, while the Nifty rise 0.4 percent.
  • The Sensex ended down 155.14 points or 0.41% at 37869.23, while the Nifty was lower by 41.20 points or 0.36% at 11429.50. The market breadth is narrow as 1,040 shares advanced, against a decline of 1,658 shares, while 140 shares were unchanged. The country’s largest bank State Bank of India (SBI) on Friday reported a net loss of Rs 4,875.85 crore for the quarter ended June as its provisions for bad loans rose by more than 70 percent year on year. The stock closed 3.8 percent lower.

 

Global Markets:-

  • The dollar rose to a 13-month high against a basket of currencies on Friday and the yen also made big strides, with investor appetite for risk dropping amid escalating global trade tensions. The dollar index, which measures the greenback’s strength against a group of six major currencies, climbed more than 0.6 percent to 96.103, its highest since July 2017.
  • Wholesale and other selling prices at businesses, indicate price pressures in the production pipeline were fairly contained at the start of the second half of 2018. While U.S. demand is rising, there’s concern about higher materials costs and persistent uncertainty as the Trump administration imposes tariffs and other nations including China retaliate. The cost of goods rose 0.1 percent from June, bringing the annual increase to 4.5 percent -the biggest gain since December 2011, the report showed. Services prices decreased 0.1 percent from the prior month, reflecting lower margins at wholesalers and retailers. Margins for fuels and lubricants retailing dropped 12.7 percent
  • China’s factory inflation held up in July even as commodity prices eased, and consumer prices gained slightly more than expected. The producer price index rose 4.6 percent from a year earlier, compared with a projected 4.5 percent increase and a 4.7 percent gain in June. The consumer price index climbed 2.1 percent, versus the forecast 2 percent rise.
  • The Chinese yuan was down 0.5% at 6.85 against dollar, after China retaliated with $16 billion worth of tariffs on U.S. imports, which would be applicable from Aug. 23, when similar additional tariffs would be imposed by the U.S. on Chinese goods. However, for the week it was about to end higher, helped by upbeat data and after its central bank took steps to curb decline.
  • The Bank of England hasn’t left it too late to start raising interest rates, even as wage growth may hit 4 percent next year, according to outgoing policy maker Ian McCafferty. McCafferty said that wage growth might “might creep up towards 4 percent-ish” in 2019, from below 3 percent currently and more than the 3.25 percent forecast by the BOE. He added that the worker shortfall was now moving from skilled occupations into unskilled sectors. Policy makers raised rates to 0.75 percent last week, the second increase in the space of the year. In both cases, McCafferty voted for a rate hike before his colleagues.
  • K. Prime Minister Theresa May is resisting the European Union’s timetable for Brexit talks and is calculating that U.S. President Donald Trump might help her. While EU officials are signaling they want September to be a showdown moment in negotiations, the U.K. is aiming for a later deadline, according to a person familiar with the situation. May’s team thinks that by the end of November the EU will be so preoccupied with the prospect of Trump disrupting a Group of 20 summit that they will want to get the Brexit deal wrapped up, The British approach is at odds with the plan emerging from Europe. The U.K. is due to leave the EU on March 29 and both sides have said they are aiming for a deal in October. Negotiators need to leave enough time for the U.K. and European parliaments to debate and ratify the final terms of the divorce.
  • The euro sank to its lowest levels in more than a year on Friday after a report that the European Central Bank (ECB) was growing concerned about the exposure of banks to a dramatic slide in the Turkish lira. The plummeting lira, caused by a deepening rift with the United States and worries about Turkey’s economy, has sent ripples across markets. Nervous investors jumped into the safe-haven dollar, yen, and Swiss franc and dumped riskier currencies like those in emerging markets. The Turkish lira’s slump has heightened concern about investor exposure to Turkey and in particular whether overleveraged companies would be able to pay back hard currency loans after years of borrowing in euro and dollars.