Rupee Opens Lower Tracking Peers; Flows, Trade Updates Eyed

Rupee Opens Lower Tracking Peers; Flows, Trade Updates Eyed

19 Nov 2019 09:12 AM

USD/INR – The Indian rupee opened lower against the dollar, tracking decline in most regional currencies, as fund flows and U.S.-China trade negotiations continue to remain in focus. The rupee opened at 71.91 to a dollar compared with its previous close of 71.8425. Yesterday, the rupee had climbed to above 71.60 before closing lower amid speculative bets on dollar inflows related to ArcelorMittal’s bid to acquire bankrupt Essar Steel. A major part of the potential $7 billion of dollar inflows has already come in and the remaining is expected to flow in shortly. The rupee is also likely to be supported by foreign purchases of Indian debt and equities. Foreign Investors have bought about $2 billion of local bonds and shares this month. The dollar index was little changed after falling for the third day yesterday. Trump remarked on Twitter that in his meeting with Federal Reserve Chair Jerome Powell yesterday, he had discussed negative interest rates, low inflation, dollar strength and its effects on trade with China and the European Union.

EUR/USD – The dollar was quoted at $1.1070 per euro on Tuesday in Asia after falling to the lowest in almost two weeks. EUR/USD longs seem to be shrugging off the latest U.S.-Sino trade concerns and are instead proceeding confidently as bullish factors increase. Market expectations for ECB and Fed rate moves currently favor EUR/USD bulls. Investors do not expect an ECB cut as far out as December 2020 while they foresee the Fed cutting 25bps in September next year. German-U.S. yield differentials should also bolster longs' confidence. Recent spread compression has paused but remains near recent tights and consolidation of that tightening has taken hold.

GBP/USD – Sterling inched higher towards $1.30 as the Conservatives lead in polls for Britain's general election, boosting the chances of Prime Minister Boris Johnson's withdrawal deal being passed by parliament before the Jan. 31 Brexit deadline. Johnson's Conservatives lead the opposition Labour Party by  10 to 17 percentage points, four polls on the Dec. 12 election showed late on Saturday. In a conference of business leaders organised by Britain's main business lobby, the CBI, Johnson said the government was postponing corporation tax cuts. The CBI's director general warned that British businesses face the threat of extreme ideology from both the left and the right wing of politics. The pound was unchanged by her comments. The pound was last up 0.5% against the dollar at $1.2954 after touching $1.2985 earlier, its highest since Oct. 22.                                                                              

USD/JPY – The dollar fell against the yen on Tuesday as receding hopes for a preliminary trade deal between the United States and China hurt demand for the greenback. There have been high expectations that the United States and China would sign a so-called "phase one" deal this month to scale back their 16-month long trade war. But the dollar took a hit on Monday after CNBC reported that China is pessimistic about agreeing to a deal, which suggests a resolution to perhaps the biggest risk to the global economy remains elusive. The dollar fell 0.11% to 108.55 yen, following a 0.09% decline on Monday.

Important data releases today

Time Ccy Event Forecast Previous
7:00 PM USD Building Permits (Oct) 1.385M 1.391M