Rupee gained 0.3% for the week against the US dollar

Rupee gained 0.3% for the week against the US dollar

07 Jun 2019 06:49 PM
 

Weekly Synopsis

 

Indian Rupee

Indian rupee rose against the dollar in the first week of June, as foreign portfolio inflows into local debt picked up in run-up to the key interest rate cut decision. Rupee gained 0.3% for the week against the US Dollar. The pair USDINR closes at 69.47 against the previous weekly close of 69.6750 on May 31st, 2019 to a greenback. It trades in a weekly range between 69.53 to 69.03 against the greenback.

India's foreign exchange reserves rose to $421.87 billion as of May 31, compared with $419.99 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.

The MPC yesterday cut the key policy repo rate by an expected 25 basis points to a nine-year low of 5.75%, and changed its policy stance to ‘accommodative’ from ‘neutral’, as it aims to boost economic growth. The rate-setting body had cut rates by 25 basis points each in its April and February policy meetings.

Global Market

The dollar was marginally up on the day but still headed for its worst week since March. Against a basket of six other currencies, the dollar was steady at 97.115, trading about 0.3% above Wednesday's eight-week low of 96.749. The index was on course for a 0.72% loss this week, its worst weekly performance since the week of March 15, when it gave up 0.73%.

The U.S. economy created fewer jobs than expected in May while the unemployment rate dropped held steady and wage inflation unexpectedly eased. Nonfarm payrolls (NFP) rose by 75,000 in May, below consensus expectations for 185,000. The jobless rate held steady as expected at 3.6%, the lowest level since December 1969 when it was 3.5%.

European Central Bank on Thursday ruled out raising interest rates in the next year and even opened the door to cutting them or buying more bonds as risk factors such as global trade war and Brexit drag the euro zone economy down.

The U.S. trade deficit unexpectedly narrowed in April as imports and exports tumbled. The politically sensitive goods trade deficit with China surged 29.7% to $26.9 billion. The gap with Mexico fell 14.1% to $8.2 billion in April.

The number of Americans filing applications for unemployment benefits was unchanged last week. Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 218,000 for the week ended June 1, the Labor Department said on Thursday.

German industrial orders rose slightly more than expected in April, pointing to resilience in Europe's largest economy despite headwinds from trade disputes and uncertainty about Brexit. Industrial output increased by 0.3 percent on the month, data released by the Statistics Office showed on Thursday.

Mounting trade tension has increased the possibility of the Fed lowering the interest rates this year. The odds of a quarter-percentage rate cut at the June meeting are currently at 25%, up from 10% a month ago. For the July meeting, at least a 25 basis-points rate cut is assigned an over 50% probability, according to the CME FedWatch Tool.

U.S. services sector activity expanded at a brisk pace in May and industries hired more workers. The ISM said its non-manufacturing activity index rose 1.4 points to a reading of 56.9 in May. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by had forecast the index would be unchanged at 55.5 last month.

Activity in Japan's services sector expanded at a slightly slower pace in May than the previous month as the rate of job creation weakened and businesses turned less optimistic about the future, a survey showed on Wednesday. The Markit/Nikkei Japan Services Purchasing Managers' Index (PMI) edged lower to a seasonally adjusted 51.7 in May from 51.8 in April.

New orders for U.S.-made goods fell in April and shipments dropped by the most in two years. Factory goods orders declined 0.8%, pulled down by softening demand for transportation equipment, computers and electronic orders, and primary metals. Orders increased 1.3% in March. Economists polled by had forecast factory orders would fall 0.9% in April. Factory orders rose 1.6% compared to April 2018. Manufacturing.

Inflation fell to an annual rate of 1.2% in the euro zone in May, according to a first estimate from the EU's statistics agency released on Tuesday. The inflation figure was below expectations. Economists polled by had expected a May estimate of 1.3%. Eurostat's flash estimate for the month does not include a monthly calculation.

Britain's construction industry had its worst month in more than a year in May. The IHS Markit/CIPS construction Purchasing Managers' Index (PMI) fell to 48.6, the lowest reading since March 2018, when the country was in the grip of an unusually cold winter. Economists poll had expected the index to remain at 50.5.

Oil prices rose on Friday, climbing further from five-month lows hit this week amid signs that OPEC and other producers may extend their output reduction deal. Brent crude futures were up 59 cents at $62.26 a barrel by 1020 GMT. U.S. West Texas Intermediate (WTI) crude futures gained 49 cents to $53.08 per barrel.

Brent is heading for a third week of declines, down more than 3%. On Wednesday, Brent and WTI hit their lowest since mid-January at $59.45 and $50.60, respectively, after U.S. crude output reached a record high and stockpiles climbed.

Local Market

Indian shares closed higher on Friday, a day after the central bank lowered interest rates by 25 basis points and changed its stance to "accommodative." The broader NSE index ended up 0.2% at 11,870.65, while the benchmark BSE index closed 0.2% higher at 39,615.90. For the week, both the NSE and BSE indexes declined, snapping three straight weekly gains.

Both the indexes were buoyed by IT stocks and financials, with the Nifty IT index ending up 0.6%. Housing Development Finance Ltd and IndusInd Bank gained 1% and 1.94%, respectively. Among losers, Dewan Housing Finance Ltd fell 11.3%.slowdown in India's $2.7-trillion economy.