Indian rupee declined 0.8% this week

Indian rupee declined 0.8% this week

11 Jul 2020 01:33 PM

Weekly Synopsis

 Indian Rupee

The Indian rupee logged its worst week against the dollar in 14 weeks, as global risk aversion heightened amid a further deterioration in the U.S. coronavirus outbreak, fueling uncertainty about an economic rebound any time soon. The unit fell 0.8%, its biggest weekly decline since the week ended Apr. 3, after rising by an aggregate of 2% in the last two weeks. Rupee closed this week at 75.20 compare to the previous week close of 74.63.

India's foreign exchange reserves rose for the second straight week to hit a record high of $513.25 billion on Jul. 3, against $506.84 billion in the previous week. The reserves jumped by $6.41 billion, the largest rise since Jun. 5, RBI data showed. The gain was mainly due to an increase in foreign currency assets that rose to $473.26 billion from $467.60 billion in the previous week.

Global Market

The dollar slipped on Friday, as its safe-haven allure diminished, on hopes of a potential vaccine for the novel coronavirus that outweighed concerns about the surge in infections in the United States and around the world. The U.S. currency posted its largest weekly percentage loss against a basket of major currencies in a month. Dollar index was down by 0.5% this week and closed at 96.64 compare to the previous week close of 97.14.

U.S. producer prices unexpectedly fell in June as rising costs for energy goods were offset by weakness in services, pointing to subdued inflation that should allow the Federal Reserve to keep pumping money into the economy to arrest a downward spiral. The producer price index for final demand dropped 0.2% last month after rebounding 0.4% in May. In the 12 months through June, the PPI declined 0.8%, matching May's decrease.

The number of Americans applying for initial unemployment benefits dropped to 1.314 million in the week ending July 3, the U.S. Labor Department said Thursday, a larger drop than expected but still underlining the view that the labor market faces a prolonged and difficult recovery from the Covid-19 pandemic. The number was lower than forecasts for 1.375 million and down from 1.413 million in the prior week, a figure that was also revised lower.

U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels, The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index jumped to a reading of 57.1 last month, the highest since February, from 45.4 in May. It has bounced back from a reading of 41.8 in April, which was the lowest since March 2009.

German exports rebounded less than expected in May as demand remained subdued despite the lifting of lockdown measures introduced to contain the spread of the coronavirus. Seasonally adjusted exports surged by 9% on the month after diving by 24% in April, remaining almost 27% lower than their pre-crisis level in February, the Federal Statistics office said. Economists polled had expected exports to rise by 13.8%.

Consumers in the euro zone returned en masse to shops in May as lockdowns were eased in the bloc, estimates from the EU statistics agency showed on Monday, signalling a sharp recovery of sales after record drops in March and April. Sales in the 19 countries sharing the euro zone rose by 17.8% in May from April, Eurostat said, The rise was higher than market expectations of a 15% rise on the month.

Japan's household spending fell at the fastest pace on record in May, as consumers heeded authorities' calls to stay home to contain the coronavirus pandemic, pushing the world's third-largest economy deeper into decline. Household spending slumped 16.2% in May from a year earlier, official data showed on Tuesday, falling at the quickest pace since comparable data became available in 2001.

China’s factory deflation eased back in June as the economic recovery continued, while consumer inflation ticked up. The producer price index registered a 3% decline last month from a year earlier, compared with the 3.7% drop in May. The consumer price index rose 2.5% on year following a 2.4% gain the previous month, the National Bureau of Statistics said Thursday. That was the same as the median forecast.

Local Market

Indian shares closed lower on Friday as record daily increases of domestic coronavirus cases threatened to disrupt an economic recovery, with financial stocks taking the brunt of the losses. But the indexes closed the week up about 1.5% each, recording their fourth straight weekly gain, following a rally driven by a flush of liquidity and hopes for a COVID-19 vaccine. Nifty closed this week at 10,768.05 compare to the previous week close of 10,607.35.

Foreign investors bought net $450.29 million worth of Indian shares on Jul. 9 according to data from the National Securities Depository Ltd. In July so far, these investors sold shares worth net $33.54 million.