Rupee Opens Higher After Phase One Of US-China Trade Deal

Rupee Opens Higher After Phase One Of US-China Trade Deal

14 Oct 2019 09:12 AM

USD/INR – The Indian rupee opened higher against the dollar after the U.S. and China announced a tentative, limited trade agreement, boosting Asian currencies and equities. The rupee opened at 70.8825 to a dollar in early trades compared with its previous close of 71.02. The onshore yuan led Asian currencies higher, climbing to a one-month high, after the U.S. agreed to suspend the planned increase in tariffs on Chinese shipments in return for purchase of U.S. agricultural goods. In exchange for the suspension of Oct. 15 U.S. tariffs increase, China agreed to buy up to $50 billion of U.S. agricultural goods and offered to open market access to U.S. financial firms. President Donald Trump hailed the agreement, which he called “Phase One” and remarked that more will be done in the next phases. A formal signing of the tentative deal agreed upon is expected at the upcoming APEC summit and “Phase Two” will begin almost immediately after “Phase One” is signed, he added. Meanwhile, data released late Friday showed that India’s industrial output fell 1.1% in August from a year ago amid contraction in manufacturing. The reading lagged behind the median estimate of 1.8% annual expansion in a poll of economists and was in contrast to July’s revised expansion of 4.6%.

EUR/USD – The euro stood at $1.1025 versus the greenback, off Friday's three-week high of $1.10625. EUR/USD appears set for further gains after striking a 15-day high as longs latch onto upbeat risk sentiment that could propel the market to test 1.1110/20. Brexit optimism is replacing no-deal fears, which drove GBP/USD's rally above 1.2700 and helped buoy EUR/USD as the dollar was sold against sterling. Further EUR/USD strength comes on hopes for some form of U.S.-Sino trade deal which spurred outflows from safe-havens such as the yen. The meager pullback from Friday's high suggests longs are growing confident despite U.S. interest rate gains, which lowered the probability for a Fed cut on Oct. 30 while also widening German-U.S. yield spreads.

GBP/USD – Sterling hovered near a three-month peak on hopes for an orderly British exit from the European Union. The British pound surged on Friday to as high as $1.2708, its strongest level since July 1. The pound was last down 0.38% at $1.2593. The EU agreed on Friday to hold another round of intense negotiations with London in a bid to break the deadlock and secure a deal before the Oct. 31 deadline. EU negotiator Michel Barnier and his British counterpart Stephen Barclay earlier held what both sides called a "constructive" meeting in Brussels. The British and Irish prime ministers said on Thursday they had found "a pathway" to a possible deal, and by Friday some officials were expressing guarded optimism.

USD/JPY – The dollar held near a 2 1/2-month high against the yen on Monday after Washington and Beijing announced progress towards a trade deal. On Friday, the dollar strengthened against the safe-haven yen to as much as 108.63 yen, its highest level since August 1, before U.S. President Donald Trump said the United States and China had reached a 'Phase 1' trade deal. It pared those gains after Trump announced the agreement, covering agriculture, currency and some aspects of intellectual property protections. The dollar inched down to 108.36 yen against the yen. Tokyo's market is closed for a public holiday on Monday, so trading volumes are likely to lighter than usual.

Currency Range for today

Currency Pair Lower Upper
USD/INR 70.60 71.10
EUR/INR 77.65 78.45
GBP/INR 88.80 89.60
JPY/INR 0.6515 0.6575

Important data releases today

Time Ccy Event Forecast Previous
12:00 PM INR WPI Food (YoY) (Sep) - 7.67%
12:00 PM INR WPI Fuel (YoY) (Sep) - -4.00%
12:00 PM INR WPI Inflation (YoY) (Sep) 0.90% 1.08%
12:00 PM INR WPI Manufacturing Inflation (YoY) (Sep) - 0.00%
5:30 PM INR CPI (YoY) (Sep) 3.70% 3.21%