Rupee Opens Lower As Oil Extends Advance; Yuan Paces Decline

Rupee Opens Lower As Oil Extends Advance; Yuan Paces Decline

17 May 2019 09:10 AM

USD/INR – The Indian rupee opened lower against the dollar after Brent crude climbed to its highest in two weeks on rising tensions in the Middle East. The rupee opened at 70.26 to a dollar in early trades compared with its previous close of 70.0250. The nearest month Brent crude contract rose in Asia trading on Friday, adding to yesterday’s 1.2% climb amid increasing the Middle East tensions. A Saudi-led military coalition in Yemen carried out several air strikes on the Houthi-held capital Sanaa on Thursday after the Iranian-aligned movement claimed responsibility for drone attacks on two Saudi oil pumping stations earlier in the week. The rupee will further be pressured by the broad decline in other Asian currencies. The Chinese yuan paced decline in regional currencies on Friday after the dollar index yesterday had its best session in three weeks. Upbeat U.S. housing data and lower-than-expected weekly jobless claims boosted the dollar against its major peers.

EUR/USD – The euro was steady at $1.1178 after falling to $1.1166 overnight, its lowest since May 6. EUR/USD bulls continue to grow frustrated over the difficulty in holding ground above the 1.1200 area. A raft of upbeat U.S. economic data added to their frustrations as price drops in U.S. Treasuries, eurodollar and fed funds eroded some of the earlier gains and reduced the odds of Fed rate cuts. German-U.S. yield spread widening is adding to the dollar's allure as investors take advantage of the greenback's yield advantage. Political concerns ahead of EU elections due May 23-26 and the Italian government's attacks on EU rules have led investors to shy away from the euro.  While those factors present downside risks to EUR/USD, a break to new trend lows seems unlikely. Short-term U.S. rates markets still price in Fed cuts while net-short euro positions remain elevated.

GBP/USD – The pound neared a four-month low on Thursday as Britain's Prime Minister Theresa May battled to keep her Brexit deal, and her premiership, intact amid growing fears of a disorderly departure from the European Union. Sterling has weakened more than 1% this month as cross-party Brexit talks have yielded little and left May vulnerable to a leadership challenge. She will set out a timetable for her departure in early June after the latest attempt to get her Brexit deal approved by parliament but could face a confidence vote if the deal is voted down. The prospect of May's demise is weighing on the pound because some investors think it could push Britain in the direction of a disorderly no-deal Brexit. Sterling was down, touching a three-month low of $1.2794.

USD/JPY – The dollar extended overnight gains, adding 0.1% to 109.80 yen. The dollar held near a two-week high against its peers on Friday, supported by strong U.S. economic data and a bounce in Treasury yields. Against the safe-haven yen, the greenback fell to a 3-1/2-month low of 109.020 at the start of the week when a trade war between the United States and China intensified. USD/JPY players face a dilemma - to cover recent shorts or lighten up on longer-term longs. Having failed to break below 109.00 on Monday (109.02 was the spike low) and following talk of government-related pension fund presumed PKO at 109.15.

Currency Range for today

Currency Pair Lower Upper
USD/INR 70.05 70.55
EUR/INR 78.10 78.90
GBP/INR 89.40 90.20
JPY/INR 0.6370 0.6430

Important data releases today

Time Ccy Event Forecast Previous
2:30 PM EUR CPI (YoY) (Apr) 1.7% 1.7%


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