Rupee slipped for a 2nd straight week against the dollar

Rupee slipped for a 2nd straight week against the dollar

17 May 2019 06:41 PM

Weekly Synopsis

 Indian Rupee

Indian Rupee slipped for a second straight week against the dollar, weighed by a decline in the Chinese yuan amid escalation in U.S.-China trade tensions, while crude oil prices rallied.

On a weekly basis, the rupee slipped 0.4%, adding to last week’s 1% depreciation. The pair USDINR closes at 70.23 against the previous weekly close of 69.91 on May 10th, 2019 to a greenback. It trades in a weekly range between 70.53 to 69.99 against the greenback.

India's foreign exchange reserves jumped to a near 13-month high to $420.06 billion as of the week ended May. 10, against $418.69 billion at the end of the previous week, according to central bank data released today. The foreign exchanges reserves were $6.02 billion short of its record high of $426.08 billion hit in April, 2018. This week’s rise was mainly due to an increase in foreign currency assets to about $392.23 billion from $390.87 billion in the prior week, the data showed.

Global Market

The dollar index traded 0.1% higher on the back of upbeat U.S. new-home construction data and weekly jobless claims report, which showed labor market strength. The index was up 0.6% for the week. The U.S. Dollar index that tracks the greenback against a basket of other currencies was last seen at 97.89.

Sterling hit a four-month low on Friday after cross-party Brexit talks collapsed and concern grew about the impact Prime Minister Theresa May's likely resignation would have on Britain's EU divorce. The pound has traded in a narrow range of $1.29-1.32 since Brexit was delayed in late March.

Euro zone prices rose by 1.7 percent in April, EU statistics agency Eurostat confirmed on Friday, while slightly revising upwards its estimates for core inflation. Eurostat said consumer prices in the 19-nation euro zone were 1.7 percent higher year-on-year, the same level as the flash estimate published on May 3, from 1.4 percent in March.

U.S. housing starts increased more than expected in April. Housing starts rose 5.7% to a seasonally adjusted annual rate of 1.235 million units last month, driven by gains in the construction of both single- and multi-family housing units, the Commerce Department said on Thursday. 

The number of Americans filing applications for unemployment benefits fell more than expected last week. Initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 212,000 for the week ended May 11, the Labor Department said on Thursday.

U.S. retail sales unexpectedly fell in April. The Commerce Department said retail sales slipped 0.2% last month after surging 1.7% in March, which was the largest increase since September 2017. Economists poll had forecast retail sales gaining 0.2% in April. Retail sales in April increased 3.1% from a year ago.

The euro zone economy accelerated quarter-on-quarter, the EU's statistics office confirmed on Wednesday. Eurostat said the economy of the 19 countries sharing the euro expanded by 0.4% quarter-on-quarter in the January-March period, the same as its initial estimate, after 0.2% growth in the last three months of 2018.

China reported surprisingly weaker growth in retail sales and industrial output for April on Wednesday. Overall retail sales in April rose 7.2% from a year earlier, the slowest pace since May 2003, data from the National Bureau of Statistics (NBS) showed. That undershot March's 8.7% and forecasts of 8.6%.

U.S. import prices rose less than expected in April. Import prices increased 0.2% last month after an unrevised 0.6% increase in March. Economists poll had forecast import prices would climb 0.7% in April. In the 12 months through April, import prices fell 0.2% after edging up 0.1% in March.

Euro zone industrial production fell in March for a second straight month, data from the European Union's statistics agency showed on Tuesday. Eurostat said output in the 19 countries sharing the euro dropped by 0.3% on the month, in line with market expectations, and by 0.6% year-on-year. The monthly fall in March followed a 0.1% decrease of the industrial production in February.

Fear of further escalation in trade war weighed on on-shore Chinese yuan, which dropped 1.4% for the week, posting its biggest weekly decline since July 2018. For the day, yuan fell below the key psychologically important level of 6.9 per dollar to 6.9085 mark.

Oil prices rose on Friday and extended gains into a fourth straight day amid intensifying Middle East tensions. U.S. crude was last up 33 cents at $63.20 a barrel, while Brent crude futures rose 19 cents to $72.81. The Organization of the Petroleum Exporting Countries and other producers will meet in Saudi Arabia this weekend to discuss whether to continue with supply cuts that have boosted prices more than 30% so far this year.

Local Market

Indian shares rose the most in three-and-a-half months on Friday, driven by gains in financial and auto stocks on strong quarterly results. The broader NSE index ended 1.33% higher at 11,407.15, while the benchmark BSE index closed up 1.44% at 37,930.77. Both indexes gained over 1% for the week.

Bajaj Finance Ltd rose 6.1% and Bajaj Finserv Ltd climbed 4.9% a day after posting strong March-quarter results. Both stocks posted their best ever close. Bajaj Auto Ltd ended 3.3% higher after posting its biggest intraday jump in four years, on better-than-expected quarterly results. Other automakers also rose, with Maruti Suzuki India Ltd and Hero MotoCorp Ltd closing up 3.5% and 4.1%, respectively.