Rupee logged its biggest weekly decline in 6 weeks

Rupee logged its biggest weekly decline in 6 weeks

05 Oct 2019 03:48 PM
 

Weekly Synopsis

 

Indian Rupee

Indian rupee logged its biggest weekly decline in six weeks against the dollar, amid a sell-off in local shares as the country’s central bank lowered its domestic growth target. The currency depreciated 0.5% this week, its biggest weekly decline since Aug. 23. The pair USDINR closes at 70.88 against the previous weekly close of 70.5575 on September 27th, 2019 to a greenback. It trades in a weekly range between 71.34 to 70.3525 against the dollar.

India's foreign exchange reserves rose for a third straight week to a record high of $433.59 billion as of the week ended Sep. 27, from $428.57 billion at the end of the prior week, according to central bank data released yesterday. The reserves gained $5.02 billion this week, logging its biggest rise since week ended on Mar. 29. The gain was mainly due to increase in foreign currency assets, which rose to $401.62 billion from $396.67 billion in the previous week, the data showed.

India’s central bank cut its key interest rate for a fifth straight time this year. The Reserve Bank of India lowered its benchmark repurchase rate by 25 basis points to 5.15% on Friday. A majority of the 39 economists in a survey predicted the move, while the rest forecast cuts ranging from 15 basis points to 40 basis points. The RBI on Friday lowered its full-year growth forecast for a fourth time to 6.1% from 6.9% previously.

Growth in India's manufacturing sector remained weak in September and forward looking indicators in a private business survey suggest the country's wobbly economy is unlikely to start recovering anytime soon. The Nikkei Manufacturing Purchasing Managers' Index , compiled by IHS Markit, was 51.4 in September, unchanged from August.

Global Market

The dollar settled into a tight range on Friday. The U.S. unemployment rate dropped to near a 50-year low of 3.5% in September. Nonfarm payrolls increased by 136,000 jobs last month, the government's survey of establishments showed. The economy created 45,000 more jobs in July and August than previously estimated. Economists poll had forecast payrolls would increase by 145,000 jobs in September.

The U.S. trade deficit increased in August as imports of consumer goods surged to a record high, but the gap with China, a focus of the Trump administration's "America First" agenda, narrowed. The Commerce Department said on Friday the trade deficit rose 1.6% to $54.9 billion. The July trade gap was unrevised at $54.0 billion. Economists poll had forecast the trade gap would widen slightly to $54.5 billion in August.

A survey from the U.S. Institute for Supply Management (ISM) showed its non-manufacturing activity index falling to 52.6 in September, the lowest since August 2016, and far below expectations of 55.1, from 56.4 in August.

British business activity wilted in the third quarter, especially in manufacturing, according to a survey on Friday. The British Chambers of Commerce's (BCC) survey of 6,600 companies showed domestic manufacturing sales fell at the fastest pace since late 2011. Growth in the much larger services sector also slowed.

U.S. holiday sales in 2019 are expected to be higher than a year earlier, the National Retail Federation said on Thursday. Sales in 2019 are estimated to grow between 3.8% and 4.2% to a range of $727.9 billion to $730.7 billion, the retail trade group said. That compares with sales of $701.2 billion, or 2.1% growth, in 2018.

U.S. services sector growth slowed to its most anemic pace in three years last month, a survey of purchasing managers showed on Thursday. The Institute for Supply Management (ISM) said its index of non-manufacturing activity fell to 52.6 from 56.4 the month before. The reading was below expectations of 55.0 from a poll of 67 economists and was the lowest since August 2016.

New orders for U.S.-made goods slipped in August. Factory goods orders dipped 0.1% after surging by an unrevized 1.4% in July, the Commerce Department said on Thursday. Economists poll had forecast factory orders would fall 0.2% in August. Factory orders edged down 0.1% compared to August 2018.

Euro zone producer prices fell more than expected in August because of a sharp drop in energy prices, data showed on Thursday. The European Union's statistics office Eurostat said prices at factory gates in the 19 countries sharing the euro fell 0.5 percent month-on-month in August for a 0.8 percent year-on-year decline. Economists poll had expected only a 0.3 percent monthly and a 0.5 percent annual fall.

Euro zone business growth stalled in September as an ongoing contraction in manufacturing activity is increasingly affecting the services industry. IHS Markit's September Euro Zone Composite Final Purchasing Managers' Index (PMI), considered a good indicator of overall economic health, sank to 50.1 from August's 51.9.

U.S. private sector hiring slowed more than expected in September a report by a payrolls processor ADP showed Wednesday. Private sector payrolls increased by 135,000, vs 140,000 forecast, August hiring revised down to 157,000 from 195,000.

A downturn in British construction deepened last month, according to a survey on Wednesday that showed. The IHS Markit/CIPS UK Construction Purchasing Managers' Index fell to 43.3 from 45.0 in August, below all forecasts in a poll of 17 economists that had pointed to an unchanged reading.

U.S. construction spending barely rose in August. The Commerce Department said on Tuesday construction spending edged up 0.1%. Data for July was revised down to show construction outlays unchanged instead of nudging up 0.1% as previously reported. Economists poll had forecast construction spending increasing 0.4% in August. Construction spending fell 1.9% on a year-on-year basis in August.

Euro zone inflation slowed in September to near a three-year low because of cheaper energy. Eurostat said on Tuesday that consumer prices in the 19 countries sharing the euro rose 0.2% month-on-month in September for a 0.9% year-on-year gain. Economists poll had expected an unchanged reading of 1.0%.

Manufacturing activity in the euro zone contracted at its steepest rate in almost seven years last month, according to a survey on Tuesday that suggested there would not be a turnaround any time soon. IHS Markit's September final manufacturing Purchasing Managers' Index (PMI) was 45.7, just above an earlier flash reading of 45.6 but its lowest since October 2012 and well below the 50 level separating growth from contraction.

The unemployment rate in the euro zone dropped in August to its lowest in more than 11 years, official data showed on Monday. The jobless rate in the 19-country euro zone fell to 7.4%, the European Union statistics agency said, its lowest since May 2008 when the euro zone's economy began to suffer from the subprime mortgage crisis in the United States.

Oil prices rose about 1% on Friday as an increase in U.S. jobs eased some financial market concerns that a slowing global economy could dent oil demand. Brent crude futures gained 66 cents, or 1.14%, to settle at $58.37 a barrel. West Texas Intermediate (WTI) crude futures rose 36 cents, or 0.7%, to settle at $52.81 a barrel. Brent futures fell 5.7% for the week, its biggest weekly drop since July. WTI lost 5.5% for the week, also its steepest fall since July.

U.S. stocks were higher after the close on Friday, as gains in the Technology, Financials and Healthcare sectors led shares higher. At the close in NYSE, the Dow Jones Industrial Average gained 1.42%, while the S&P 500 index gained 1.42%, and the NASDAQ Composite index gained 1.40%.

Local Market

Indian shares fell for a fifth straight session and closed over 1% lower on Friday after the central bank cut interest rates as expected in an effort to revive growth in Asia's third-largest economy. The broader NSE index closed down 1.23% at 11,174.75, while the benchmark BSE index settled 1.14% lower at 37,673.31. For the week, both NSE and BSE fell nearly 3%.

The Nifty private bank index and the Nifty PSU bank index, which track state-owned banks, fell 2.5% and 1.89%, respectively. IT stocks were among 13 gainers in the NSE index, with India's second-biggest software services firm, Infosys Ltd, settling 1% higher.