Rupee Opens Little Changed; Crude Oil, Yuan Watched

Rupee Opens Little Changed; Crude Oil, Yuan Watched

20 Sep 2019 09:14 AM

USD/INR – The Indian rupee opened little changed against the dollar as investors focus on choppy crude oil prices and the Chinese yuan. The rupee opened at 71.20 compared with its previous close of 71.3175. Brent crude ticked higher in Asia trading on Friday to near $65 a barrel. Following the weekend attacks on Saudi Arabia’s oil infrastructure, Brent is poised to record its biggest weekly advance in more than eight months. However, prices are well off the weekly high of near $72 a barrel as Saudi Arabia asserted that the attacks will have a limited impact on the oil output. Meanwhile, the yuan traded little changed at 7.0958. The U.S. and China resumed deputy level talks ahead of the high-level discussions planned for early next month. The resumption of talks alongside President Donald Trump delaying the imposition of a planned increase in tariffs helped the Chinese currency rebound from multiyear lows of 7.18. Separately, India’s economic growth has slowed to an over six-year low of 5% in the April-June period and is expected to remain weak amid a slump in domestic demand and global uncertainties. The Reserve Bank of India head Shaktikanta Das remarked yesterday that with growth slowing and inflation likely to remain below target, there was room for more rate cuts.

EUR/USD – EUR/USD has erased most of the Fed induced losses and is threatening to break above the trend line off June's high. EUR/USD shorts should be worried that price action after major policy moves from the Fed and ECB have not resulted in favorable price action. The Fed delivered a hawkish cut while the ECB introduced QE, which is expected to be open-ended. Investors would normally expect bearish price action on that combination of central bank policies but they have been disappointed. Despite the Fed's moves and yesterday's upbeat U.S. data prices for U.S. Treasuries, eurodollar and fed funds are higher and rates are lower. The divergent rate paths are tightening German-U.S. yield spreads, which helps buoy EUR/USD. EUR/USD was last trading at 1.1055.

GBP/USD – Sterling rallied in late U.S. trading following comments from European Commission President Jean-Claude Juncker which raised hopes for a deal for Britain to leave the European Union. Britain said on Thursday it had shared documents with Brussels setting out ideas for a Brexit deal, but an EU diplomat described them as a "smokescreen" that would not prevent a disorderly exit on the Oct. 31 divorce date. Derivative markets signalled a pick-up in expectations of swings in the pound in the coming weeks, with one- and two-month volatility gauges spiking higher on Thursday. GBP/USD was last trading at 1.2550.

USD/JPY – U.S housing data beats help, but news from U.S.-China trades talks wrapping up today needs to be benign enough to make the Fed's rate cut reluctance look reasonable, not a reason to worry about yield curve inversions and recession. USD/JPY and Treasury yields are trying to resume their downtrends after erasing the drops that followed the July 31 FOMC and Aug. 1 trade war escalation. Today's USD/JPY fall on retreating Treasury yields was aided by yen gains on disappointment the BOJ didn't cut rates, like the ECB and Fed. But that disappointment was tempered by Kuroda's claim that a cut could come next month, though the market still sees a December cut as more likely. USD/JPY was last trading at 107.92.

Currency Range for today

Currency Pair Lower Upper
USD/INR 71.00 71.50
EUR/INR 78.30 79.10
GBP/INR 88.80 89.60
JPY/INR 0.6570 0.6630

Important data releases today

Time Ccy Event Forecast Previous
5:00 PM INR FX Reserves, USD - 429.61B
5:30 PM INR Current Account (USD) - -4.60B