Rupee post best week in 7 on inflows and Oil price decline

Rupee post best week in 7 on inflows and Oil price decline

04 May 2019 02:59 PM

Weekly Synopsis

 Indian Rupee

Indian rupee posted its best weekly gain in seven weeks against the dollar, helped by foreign fund inflows into local assets and slump in crude oil prices.

The rupee rose 1.1% this week, posting its biggest weekly rise since week ended Mar. 15. The pair USDINR closes at 69.2150 against the previous weekly close of 70.01 on April 26th, 2019 to a greenback. It trades in a weekly range between 69.90 to 69.20 against the greenback.

India's foreign exchange reserves jumped to a near one-year high to $418.52 billion as of the week ended Apr. 26, against $414.15 billion at the end of the previous week, according to central bank data released on Friday. The rise was mainly due to an increase in foreign currency assets to about $390.42 billion from $386.03 billion in the prior week, the data showed.

India's unemployment rate in April accelerated to 7.6 percent, the highest since October 2016, and up from 6.71 percent in March 2019, according to data compiled by the Centre for Monitoring Indian Economy (CMIE) that was released late Wednesday.

Global Market

U.S. dollar snapped its two-week winning streak on Friday as jobs data showing softer wage growth supported expectations that the Federal Reserve is likely to remain on pause. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies fell 0.36% at 97.44, with the euro up 0.2% to $1.1198.

The U.S. economy created more jobs than expected in April while wage growth held steady. Nonfarm payrolls (NFP) rose by 236,000 in March, smashing consensus expectations for 181,000.

The US jobless rate fell unexpectedly to 3.6%. That was its lowest level December 1969 when it was at 3.5%.  Average hourly earnings grew just 3.2% on an annualized basis, unchanged from March, and short of a consensus forecast of 3.3%. The Fed monitor that component of the data for signs of upward pressure on inflation.

America’s merchandise-trade deficit widened in March for the first time in three months as an increase in imports exceeded the rise in exports. The goods-trade gap grew to $71.4 billion from $70.9 billion in February, according to Commerce Department figures released on Friday, below economist estimates for the deficit to widen to $73 billion.

New orders for U.S.-made goods rose by the most in seven months. Factory goods orders rebounded 1.9 percent, also boosted by orders for computers and electronic products, the Commerce Department said on Thursday. That was the largest rise since August 2018.

The number of Americans filing applications for unemployment benefits was unchanged at higher levels last week. Initial claims for state unemployment benefits were flat at a seasonally adjusted 230,000 for the week ended April 27, the Labor Department said on Thursday.

The Bank of England left interest rates on hold at 0.75% on Thursday and raised its growth forecasts, in what was its first monetary policy meeting since the deadline for Brexit was delayed for six months. The vote on the decision was unanimous, with all nine policymakers voting in favor of keeping rates on hold.

Britain's construction industry is being shielded from the uncertainty about Brexit by modest growth in house-building, industry surveys showed on Thursday. Builders registered 37,672 new homes for warranties and insurance from the National House-Building Council (NHBC) between January and March, up 3 percent compared with a year earlier.

The Federal Reserve left interest rates unchanged on Wednesday, sticking with its wait-and-see approach as inflation continued to run below target. But Fed Chairman Jerome Powell cooled investor expectations for a rate cut. The Federal Open Market Committee left its overnight funds rate in a range of 2.25% to 2.5%.

U.S. construction spending unexpectedly fell in March after three straight monthly gains. The Commerce Department said on Wednesday construction spending decreased 0.9 percent. Data for February was revised to show construction outlays rising 0.7 instead of increasing 1.0 percent as previously reported.

U.S. private employers added a far larger-than-forecast 275,000 jobs in April, according to a report by payrolls processor ADP. It was the largest increase since July, when the private sector added 284,000 jobs. Economists had expected the report to show a gain of 181,000 jobs.

Contracts to buy previously owned homes rose to an eight-month high in March, the National Association of Realtors said on Tuesday. The NAR's pending home sales index increased to a reading of 105.8, up 3.8 percent from the prior month and the highest since July. February's index was unrevised at 101.9.

The euro zone economy grew more than expected in the first quarter, rebounding from a slump in the second half of 2018. The European Union's statistics office, Eurostat, said gross domestic product rose 0.4 percent quarter-on-quarter in the first three months of 2019, up from 0.2 percent in the fourth quarter of 2018 and 0.1 percent in the third.

Oil prices inched up on Friday as strong U.S. economic data boosted demand sentiment and as production losses in sanctions-hit Iran and Venezuela tightened the market. Still, oil futures recorded weekly declines after a jump in U.S. crude inventories reported this week.

Brent crude oil futures settled at $70.85 a barrel, rising 10 cents. The global benchmark shed 2.6%for the week, breaking a five-week winning streak. U.S. West Texas Intermediate (WTI) crude futures closed at $61.94 a barrel, up 13 cents, while losing about 3% percent during the week, its second straight weekly decline.

The Dow Jones Industrial Average rose 196.55 points, or 0.75%, to 26,504.34, the S&P 500 gained 28.06 points, or 0.96%, to 2,945.58 and the Nasdaq Composite added 127.22 points, or 1.58%, to 8,164.00. For the week, the S&P gained 0.19%, the Dow slipped 0.15% and the Nasdaq gained 0.22%.

Local Market

Indian shares reversed course in late trade to end slightly lower on Friday, dragged by IT giant Tata Consultancy Services Ltd (TCS), which saw its worst day in nearly seven months. The broader NSE index fell 0.11 percent to 11,712.25, while the benchmark BSE index shed 0.05 percent to end at 38,963.26. Both indexes finished the week about 0.3 percent lower.

TCS shares fell 3.8 percent and dragged the Nifty IT index to its worst close in over two weeks, hurt by a stronger rupee. A cut in IT services and outsourcing company Cognizant Technology Solutions Corp's 2019 revenue forecast also weighed on the sentiment.