Rupee recorded its best week in 4 against the dollar

Rupee recorded its best week in 4 against the dollar

21 Jun 2019 06:45 PM
 

Weekly Synopsis

 

Indian Rupee

Indian rupee recorded its best week in four against the dollar, as the U.S. Federal Reserve in its recent policy decision hinted at chances of interest rate cut this year. For the week, rupee gained 0.4%, its best gain since week ended May 24. Most Asian currencies also ended this week with a positive bias. The pair USDINR closes at 69.55 against the previous weekly close of 69.80 on June 14th, 2019 to a greenback. It trades in a weekly range between 69.9425 to 69.4250 against the greenback.

India's foreign exchange reserves fell to $422.20 billion as of June 14, compared with $423.55 billion a week earlier, the Reserve Bank of India said on Friday. Changes in foreign currency assets, expressed in dollar terms, include the effect of appreciation or depreciation of other currencies held in its reserves.

Global Market

The dollar was headed for a big weekly loss on Friday and the euro a solid gain after a dovish shift by the Federal Reserve, and investors also briefly pushed the yen to a new five-month high amid rising tensions between the United States and Iran. The dollar index fell 0.1% to 96.495, its lowest for two weeks. The index is headed for a fall of 1% since Monday.

Focus now shifts to whether the United States and China can resolve their trade row at a summit in Japan next week of leaders from the Group of 20 leading world economies. Presidents Xi Jinping and Donald Trump are due to meet on the sidelines of the G20 next weekend.

The euro hit a high of $1.1319, up 0.2% on the day, after French and German business activity strengthened more than expected in June, according to surveys. The common currency, up 0.9% since Monday, later settled at $1.1309.

The U.S. central bank left borrowing costs unchanged on Wednesday, but suggested it could ease monetary policy as early as next month amid mounting concerns over the economic impact of global trade tensions and subdued inflation.

Euro zone business activity picked up a touch this month. IHS Markit's Flash Composite Purchasing Managers' Index (PMI), which is considered a good guide to economic health, only nudged up to 52.1 this month from a final May reading of 51.8, beating the median expectation in a poll for 51.8.

Euro zone consumer confidence fell by 0.7 points in June from the May number, figures released on Thursday showed. The European Commission said a flash estimate showed euro zone consumer morale decreased to -7.2 this month from -6.5 in May. Economists poll had expected June euro zone consumer confidence to be at -6.5.

The number of Americans filing applications for unemployment benefits fell more than expected last week. Initial claims for state unemployment benefits dropped 6,000 to a seasonally adjusted 216,000 for the week ended June 15, the Labor Department said on Thursday. Data for the prior week was unrevised.

The U.S. current account deficit narrowed sharply in the first quarter as imports of goods declined. The Commerce Department said on Thursday the current account deficit, which measures the flow of goods, services and investments into and out of the country, fell 9.4% to $130.4 billion.

The Bank of England kept interest rates on hold at 0.75% on Thursday, but stuck to its message that it plans to raise rates despite an ongoing lack of clarity on Brexit. The vote was unanimous, with all nine policymakers in favor of keeping rates on hold, despite two officials talking recently of the need for higher borrowing costs sooner rather than later.

The Bank of Japan kept monetary policy steady on Thursday, preferring to save its dwindling ammunition as a darkening global growth outlook prompts other major central banks to drop hints of additional stimulus. As widely expected, the BOJ maintained its short-term rate target at -0.1% and a pledge to guide 10-year government bond yields around zero percent.

The euro zone's adjusted current account surplus narrowed to 20.9 billion euros in April from 24.7 billion euros a month earlier, mostly on a drop in the trade surplus, the European Central Bank said on Wednesday. Based on unadjusted figures, the surplus narrowed to 19.2 billion euros from 35.1 billion a month earlier.

U.S. homebuilding unexpectedly fell in May. Housing starts dropped 0.9% to a seasonally adjusted annual rate of 1.269 million units last month amid a drop in the construction of single-family housing units, the Commerce Department said on Tuesday.

Inflation in the euro zone slowed to 1.2% in May, the lowest rate in more than a year. Eurostat said prices in the 19-country currency bloc went up by 1.2% on the year, slowing from 1.7% in April. It was the lowest growth rate since April 2018 when inflation was also recorded at 1.2%.

A private gauge of U.S. home builder sentiment fell in June, retreating from a six-month high, as rising building costs and trade worries offset falling mortgage rates. The gauge on current single-family home sales dipped to 71 from 72, while the barometer on prospective buyers decreased to 48 from 49.

Brent oil rallied above $65 per barrel and was set to notch up a 6% gain this week on fears of a U.S. military attack on Iran that would disrupt flows from the Middle East, which provides more than a fifth of the world's oil output.

Brent crude was up $1.02, or 1.6%, at $65.47 a barrel. The global benchmark jumped 4.3% on Thursday and was up around 6% for the week, in its first weekly gain in five weeks. U.S. West Texas Intermediate crude was up 58 cents, or 1%, at $57.63 a barrel. The U.S. benchmark surged 5.4% on Thursday and was on track for a 10% increase this week.

Local Market

Indian shares settled lower on Friday, marking their third weekly decline, as uncertainty over the U.S.-China trade negotiations and rising oil prices outpaced investor euphoria around the Federal Reserve's rate-cut signals. The broader NSE index closed down 0.91% at 11,724.10, while the benchmark BSE index ended 1.03% lower at 39,194.49. For the week, the NSE and BSE indexes closed down 0.78% and 0.68%, respectively.

The Nifty auto index was down 1.22% at the closing bell, as the sector battles production cuts and lean demand for passenger vehicles. Sector heavyweights Maruti Suzuki and Hero Motocorp ended 3% and 2.24% weaker, respectively. Earlier in the session, Maruti's shares were among NSE index's top losers after it warned of price increases on one of its top-selling cars, as it copes with new emission norms.