Dec 21 2018

Rupee posted its best week in over 5 years on lower crude and Fed outlook

Weekly Synopsis

Date:- 21st December 2018

Markets from 17th December 2018 to 21st December 2018:-

 

Indian Rupee

Indian rupee recorded its biggest weekly rise in more than five years against the dollar, tracking the slump in crude oil prices which eased concerns of widening of trade gap at home, while the U.S. Federal Reserve lowered its rate hike outlook.

The currency strengthened 2.4% this week, its biggest weekly jump since week ended on Sep. 13, 2013. The rupee closes on Friday at 70.1450 against the previous weekly close of 71.8950 on December 14th, 2018 to a greenback. It trades in a weekly range between 71.8675 to 69.66 against the US Dollar.

The Indian government plans to increase its capital infusion into some state-run banks to 1.06 trillion rupees ($15.13 billion) in the current fiscal year ending in March, a finance ministry source said on Thursday. The official was speaking after the government sought parliamentary approval for 410 billion rupees of new funds. Earlier this year it had been granted approval for 650 billion rupees.

India’s foreign exchange reserves fell to $393.12 billion as of the week ended Dec. 14, from $393.73 billion in the previous week, according to central bank data released today. The decrease was mainly due to a fall in foreign currency assets to $367.87 billion from $368.50 billion a week earlier, according to the data.

Global Market:-

The dollar languished close to one-month lows on Friday, seemingly pressured by year-end positioning with financial markets whipsawed by a collapse in oil prices, sell-off in equities and a threat of a U.S. government shutdown. The dollar index against a basket of six major currencies stood at 96.62 after falling to 96.168 overnight, its lowest since Nov. 20. The index has lost roughly 1 percent this week.

The Federal Reserve raised interest rates by a quarter point on Wednesday. The Federal Open Market Committee raised the fed funds rate 25 basis points to a range of 2.25% to 2.5%.Members of the rate-setting committee reduced their 2019 median forecast for interest rates to 2.9% from a previous estimate of 3.1%, hinting at two rates hikes in 2019.

The number of Americans filing applications for jobless benefits rose marginally from near a 49-year low last week. Initial claims for state unemployment benefits increased 8,000 to a seasonally adjusted 214,000 for the week ended Dec. 15, the Labor Department said on Thursday.

Britain’s annual economic growth for the third quarter went unrevised, according to figures released by the Office for National Statistics on Friday. GDP grew by 1.5% on a year-to-year basis in the quarter, unchanged from the preliminary estimate and in line with expectations. On a quarterly basis, growth came in at 0.6%, which was also in line with expectations for no change from the preliminary reading.

The Philadelphia Fed’s manufacturing index unexpectedly fell in December, to a reading of 9.4 from 12.9 in November, the Philly Fed reported on Thursday. The consensus forecast had been for a reading of 15.6. Any reading above zero indicates improving conditions and below indicates worsening conditions.

The Bank of England left interest rates unchanged as uncertainty over the UK’s exit from the European Union – with little more than three months to go – increases. The BoE’s Monetary Policy Committee voted unanimously to hold rates steady at 0.75%.

UK retail sales rose a higher than expected 1.4% in November, the Office for National Statistics said Thursday. That compared with a 0.4% decrease in the previous month and economist forecasts for a 0.3% advance. Year-on-year, retail sales rose 3.6% last month, above analyst expectations for a 1.9% gain.

U.S. home sales unexpectedly rose in November, but recorded their biggest annual decline in 7-1/2 years. The National Association of Realtors said existing home sales increased 1.9 percent to a seasonally adjusted annual rate of 5.32 million units last month. October’s sales pace was unrevised at 5.22 million units.

The annual rate of change in Britain’s consumer price index dropped to its lowest level in 21-months in November. Year-on-year, UK CPI rose 2.3% last month, its lowest level since March 2017, after a 2.4% increase in October.

U.S. homebuilding unexpectedly jumped in November, providing some relief to concern of the health of the American real estate sector. Housing starts increased 3.2% to a seasonally adjusted annual rate of 1.256 million units last month, the Commerce Department said.

German business confidence deteriorated for the fourth straight month in December, according to survey data released on Tuesday. The Munich-based Ifo economic institute said its business climate index, based on a monthly survey of companies, declined to 101.0 from 102.0 in November. The reading was below expectations for 101.8.

Euro zone consumer price inflation for November was unexpectedly revised lower on Monday, adding to skepticism that the European Central Bank will be able to move ahead with an interest rate hike in 2019. The bloc’s statistics agency Eurostat said that CPI rose 1.9% in November from the same month a year earlier.

Oil prices steadied on Friday, finding some stability after falling 10 percent in a week as investors drew breath ahead of the long festive break, but the outlook remained nervous with many investors staying on the sidelines.

Brent crude was down 45 cents at $53.90 per barrel, after dropping $2.89 or 5.0 percent on Thursday and was set for a loss of around 10.6 percent this week. U.S. light crude oil was down 20 cents at $45.68, on course for a decline of 10.7 percent for the week.

Local Market

Indian shares ended around 2 percent lower on Friday, dragged by financials and IT heavyweights such as Infosys Ltd and ICICI Bank Ltd, with the sentiment dampened by weak global cues. Domestic shares tracked broader Asian markets as the possibility of a U.S. government shutdown and further rate hikes by the Federal Reserve next year made investors jittery.

The benchmark BSE index closed down 1.89 percent at 35,742.07 and fell 0.6 percent this week. The broader NSE index ended 1.81 percent lower at 10,754, shedding 0.48 percent in the week. Shares of software services exporters Infosys Ltd and Tata Consultancy Services Ltd closed 3.13 percent and 2.98 percent lower, respectively while ICICI Bank ended 2.2 percent lower.