Feb 14 2019

Rupee Opens Lower On Broad Dollar Strength, Brent Crude

USD/INR – The Indian rupee opened lower against the U.S. dollar after the dollar index climbed back to two-month highs amid higher-than-expected core U.S. inflation data. The rupee opened at 70.87 against the dollar compared with its previous close of 70.7950. On Wednesday, the dollar index climbed 0.4% after data showed that core inflation in the world’s largest economy rose 2.2% in January, faster than the 2.1% expected. The dollar index received a further boost from the weaker-than-expected December Euro zone industrial production data, which pushed the euro to near three-month lows to the dollar. Meanwhile, Brent crude edged higher in Asia on Thursday, heading towards $64 a barrel.

EUR/USD – The dollar held near 3-month highs against the euro on Thursday, benefiting from sustained strength in core U.S. inflation and weak data out of Europe. The big downside surprise to euro zone December industrial production reinforced views that Europe’s slowdown is not transitory, as the ECB had suggested, leaving the euro on its heels. Meanwhile, Spain’s parliament rejected the government’s budget proposal, increasing political uncertainty and the chances of early elections. Upside surprises to U.S. core and headline CPI (y/y) have further depressed EUR/USD longs. German-U.S. yield spreads widened after the CPI, helping to push EUR/USD lower. EUR/USD was last trading at $1.1280.

GBP/USD – GBP/USD has been in a holding pattern above 1.2814, 50% of the 2019 rebound, for over a week but events in the UK parliament today may change that. There will be a debate on PM May’s motion that she should seek to negotiate a solution to the Irish border issue. This will be followed by debate and perhaps voting on a series of amendments, including one that calls for a second Brexit referendum. Certainly if May opened the door to a second referendum, GBP would bounce significantly. British Prime Minister Theresa May returns to parliament on Thursday to seek renewed backing for her plan to renegotiate her Brexit deal with Brussels. While Thursday’s vote is symbolic, it could again become the focus for increasing frustration in parliament over her strategy to leave the European Union. GBP/USD was last trading at $1.2860.

USD/JPY – The yen was steady at 110.95. The dollar has gained on its Japanese rival in recent weeks, up 1.9% so far in February. Analysts believe that Japanese demand for foreign bonds is one factor leading to weakness in the yen. USD/JPY pushed above 111.00 overnight, trading to 111.06 before falling back. Large stops were tripped above exotic option barriers at 111.00, but any buying was easily absorbed by fresh Japanese exporter offers and from recent longs booking profits. Risks to the downside still abound as well, with nothing concrete yet from U.S.-China trade talks and the Trump administration still unpredictable despite the likely aversion to another government shutdown. U.S. yields though looking to have based for now, remain a major question for USD/JPY given their failure to bounce further.

Currency Range for today

Currency Pair Lower Upper
USD/INR 70.75 71.25
EUR/INR 79.60 80.40
GBP/INR 90.80 91.60
JPY/INR 0.6360 0.6420

Important data releases today

Time Ccy Event Forecast Previous
12:00 PM INR WPI Food (YoY) (Jan) -0.07%
12:00 PM INR WPI Fuel (YoY) (Jan) 8.38%
12:00 PM INR WPI Inflation (YoY) (Jan) 3.65% 3.80%
12:00 PM INR WPI Manufacturing Inflation (YoY) (Jan) 3.59%
12:30 PM EUR German GDP (QoQ) (Q4) 0.1% -0.2%
7:00 PM USD Core Retail Sales (MoM) (Dec) 0.0% 0.2%
7:00 PM USD Retail Sales (MoM) (Dec) 0.1% 0.2%
7:00 PM USD PPI (MoM) (Jan) 0.1% -0.2%