Feb 15 2019

Rupee Opens Lower On Diminishing Risk Appetite And Rising Brent Crude Prices

USD/INR – The Indian rupee opened lower against the dollar in the wake of Brent crude’s climb to near $65 a barrel, and losses in Asian currencies and equities. The rupee opened at 71.23 against the dollar compared with its previous close of 71.16. Most Asian currencies were trading lower against the dollar on Friday amid losses in regional equities. Japan, South Korea, and Hong Kong paced the decline in Asian equities after economic data out of the U.S. and China brought back investor focus on the global growth outlook. While the disappointing U.S. retail sales data, which prompted a decline in U.S. yields and the dollar index, will provide a measure of relief, technical factors and oil suggest difficult times for the rupee in the coming days.

EUR/USD – The big downside surprise to December U.S. retail sales data has taken the shine off the dollar and lifted EUR/USD, but the euro will struggle to secure further gains. The U.S. rate complex has fallen hard after the data which has tightened German-U.S. spreads, but the post-data reaction might be short-lived. The December sales period covered by the data was marked by extreme volatility in financial markets, which likely had a negative effect. Volatility has fallen sharply in early-2019, and that could indicate an improvement for future retail sales data. German Q4 GDP (q/q) came in flat versus expectations for 0.1%, which reinforces the anemic conditions for euro zone growth. Brexit, potential U.S. tariffs, U.S.-Sino trade and concerns on Spanish and EU elections are continual bearish risks facing euro. EUR/USD was last trading at $1.1290.

GBP/USD – Sterling was down 0.1% at $1.2795. British Prime Minister Theresa May suffered a defeat on her Brexit strategy on Thursday that undermined her pledge to European Union leaders to get her divorce deal approved if they grant her concessions. In a show of muscle, hardline Brexit supporters in her Conservative Party decided to abstain, handing her an embarrassing, albeit symbolic, defeat as she tries to renegotiate her deal with the EU. While it will not deter May from trying to secure changes on the most contentious issue of the deal – the Irish backstop – the vote does show that her pro-Brexit lawmakers are a major obstacle to passing any agreement. The crunch vote is now expected to come on Feb. 27, when May is due to return to parliament – and lawmakers who fear leaving without a deal could try to seize control of Britain’s departure from the EU.

USD/JPY – The dollar weakened against the yen on Friday as dismal U.S. retail sales data reinforced expectations Federal Reserve rates will not rise this year, while investor focus shifted to trade talks between Washington and Beijing. Retail sales posted their largest decline since September 2009, U.S. data showed on Thursday, a sign of weakness in the consumer sector, which accounts for more than two-thirds of the economy. The dollar lost about 0.5% against the safe-haven yen in the overnight session and was relatively unchanged in early Asian trade. Japanese investors added to their foreign bond portfolios last week and anecdotal evidence suggests foreign investors are moving back into Japanese equities, both of which should support USD/JPY. USD/JPY was last trading at 110.30.

Currency Range for today

Currency Pair Lower Upper
USD/INR 71.0071.50
EUR/INR 80.0080.80
GBP/INR 90.9091.70
JPY/INR 0.64300.6490

Important data releases today

Time Ccy Event Forecast Previous
3:00 PM GBP Retail Sales (MoM) (Jan) 0.2% -0.9%
5:00 PM INR Bank Loan Growth 14.6%
5:00 PM INR Deposit Growth 9.7%
5:00 PM INR FX Reserves, USD 400.24B
5:40 PM INR Trade Balance -13.80B -13.08B