The Indian rupee recorded its first weekly rise in three weeks against the dollar, as investors’ demand for local assets increased in run-up to Prime Minister Narendra Modi-led alliance’s massive win in national elections for a second time.
On a weekly basis, the rupee gained nearly 1%, and posted its biggest single-session rise against the dollar since Mar. 18. The pair USDINR closes at 69.5250 against the previous weekly close of 70.22 on May 17th, 2019 to a greenback. It trades in a weekly range between 70.09 to 69.3525.
Modi’s Bharatiya Janata Party-led alliance swept national elections for a second time yesterday. The BJP itself won 303 seats, while the NDA as whole secured 352 seats of the 542 constituencies that went to polls, according to the Election Commission website. A party or alliance needed 272 seats to form a government.
India's foreign exchange reserves fell most in over three months to about $418 billion as of the week ended May 17, against $420.06 billion at the end of the previous week, according to central bank data released today. The $2.06 billion fall in reserves was the biggest decline since week ended on Feb. 8. This fall was mainly due to a decrease in foreign currency assets to about $390.20 billion from $392.23 billion in the prior week, the data showed.
The dollar edged away from two-year highs on Friday after weak U.S. manufacturing activity data sparked worries that the trade conflict with China may hurt the world's largest economy and affect the currency's safe-haven status. Against a basket of six major currencies, the dollar was down 0.2% at 97.686 at one stage and 0.7% off a two-year high of 98.371 hit the previous session.
Dollar weakness also helped boost sterling, though the British currency extended its rally after UK Prime Minister Theresa May said on Friday she would quit, setting up a contest that will bring a new prime minister to power who could pursue a cleaner break with the European Union.
Sales of new U.S. single-family homes fell from near an 11-1/2-year high in April as prices rebounded and manufacturing activity hit its lowest level in almost a decade in May. The Commerce Department said new home sales dropped 6.9% to a seasonally adjusted annual rate of 673,000 units last month.
On Thursday, data firm IHS Markit said its U.S. manufacturing PMI declined to a reading of 50.6 in early May, marking the lowest level since September 2009, from 52.6 in April. A reading above 50 indicates growth in the manufacturing sector, which accounts for about 12% of the U.S. economy.
British retailers reported the weakest sales performance for the time of year in over a decade this month. The CBI distributive trades survey's retail sales balance slumped to -27 in May from +13 in April, below all forecasts in a poll and the lowest since October 2017.
A recovery in euro zone business activity was weaker than expected this month. IHS Markit's Flash Composite Purchasing Managers' Index (PMI), which is considered a good guide to economic health, only nudged up to 51.6 this month from a final April reading of 51.5, below the median expectation in a poll for 51.7.
British inflation rose last month by less than investors and the Bank of England had expected but still hit its highest level this year. Consumer prices rose at an annual rate of 2.1% in April after a 1.9% increase in March, the Office for National Statistics said on Wednesday. A poll of economists had pointed to a rate of 2.2%, the same as the BoE's forecast.
Japanese exports contracted for the fifth month in April due to a slump in shipments of chip-making equipment to China, underlining the growing threat to the world's third-biggest economy from a bruising Sino-U.S. trade war. Ministry of Finance (MOF) data showed on Wednesday Japan's exports fell 2.4% in April from a year earlier, down for a fifth straight month.
British factories reported the biggest fall in orders this month since late 2016 after a recent push to build up stocks of goods in advance of a Brexit that never came, a survey showed on Tuesday. The Confederation of British Industry's (CBI) monthly order book balance fell to -10 from -5 in April, its lowest level since October 2016 and below all forecasts in a poll of economists.
British households turned more downbeat about their finances in May. IHS Markit, a data firm, said on Monday its Household Finance Index (HFI) fell to 42.5 from 43.8, its lowest level since September 2017 as worries grew about job security, particularly in retail and manufacturing.
Global risk aversion amid prolonged U.S.-China trade tension plagued global markets this week. In recent development, U.S. president Donald Trump said U.S. complaints against Chinese telecom equipment provider Huawei will be resolved within the framework of a U.S.-China trade deal.
Oil rose towards $69 a barrel on Friday after two sessions of losses, but remained on track for its biggest weekly drop this year due to rising inventories and concerns about an economic slowdown. Brent crude, the global benchmark, rose 98 cents to $68.74 a barrel but remained on course for a decline of nearly 5% this week. U.S. West Texas Intermediate crude added 75 cents at $58.66.
Indian shares jumped over 1.5% on Friday on hopes that Prime Minister NarendraModi would pursue business-friendly policies following his party's thumping victory in the general election. The broader NSE index ended 1.60% higher at 11,844.1. It gained 3.84% for the week, its biggest since the five sessions to Nov. 2, 2018. The benchmark BSE index closed up 1.61% at 39,434.72, recording a 3.96% weekly gain.
Financials were top gainers with ICICI Bank Ltd closing 5.1% higher, while State Bank of India Ltd rose 3.84%. JSW Steel Ltd ended 4.37% higher after reporting its March-quarter results.
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