Currency Market Snapshot For The Week
· INR depreciated by 2.17% against the USD last week and depreciated by 4.85% against the euro.
· USD fell by 2.22% on a week on week basis and is at a level of 95.95.
· The British pound appreciated by 1.75% against the USD
· Euro appreciated by 2.34% against the USD.
Global Bond Market Snapshot For The Week
· US 10-year benchmark bond yields fell by 40 bps last week.
· German 10-year bond yields fell by 10 bps, French 10-year bond yields fell by 6 bps to negative 0.35%.
· Italy’s 10-year benchmark yield fell by 2 bps to 1.07%.
· US benchmark Junk bond yields rose by 3 bps to 5.82%
INR depreciated sharply by 2.17% against the USD and touched a record low of Rs 74.08, as FIIs sold equities and bonds for USD 1.6 billion and USD 0.5 billion respectively last week. RBI taking control of troubled Yes Bank raised risk aversion and concerns of the Indian economy slowing to a more than six-year low in the Q3 of FY20 hurt the appetite for INR assets. The threat from the COVID-19 outbreak is further lowering the risk appetite for INR. INR will continue to trend down on the back of negative sentiments on the Indian economy.
Globally, more than 100000 people have been infected with COVID-19, which will weigh on USD/INR movement significantly.
Russia and OPEC split on global oil production cuts and world economic growth concerns on coronavirus took down oil prices with prices plunging by over 10% last week, which led to Russian Ruble falling sharply by 2.5% against USD. Saudi Aramco started a price war by cutting all grade April 2020 crude sales price by USD 4-7 per barrel.
AUD appreciated 1.86% against USD last week as RBA cut benchmark rates by 25 bps.
During the week the Fed cut rates by 50 bps as an emergency measure to tackle the Corona Virus effects on the Economy.
USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 2.22% on a week on week basis and is at a level of 95.95. As decisive rate cut shift and rise in COVID-19 deaths in the US lead to weaker USD against major currencies.
US trade deficit was down 6.7% monthly, falling by USD 3.3 billion to USD 45.3 billion in January 2020.Exports were at USD 208.6 billion, and imports were at USD 253.9 billion.
US Non-farm payrolls for February 2020 rose by 273k, which wasmore than expected and unemployment rates rstayed low at 3.5%. Health care and social assistance witnessed the highest additions, average hourly earnings was 3% higher yearly. Market will closely watch March jobs report as coronavirus outbreak is expected to hit the jobs market.
The Institute for Supply Management (ISM) published US Non-manufacturing activity index increased strongly to 57.3 from 55.5 in January 2020.
Institute of International Finance data showed February 2020 portfolio flows to emerging markets were down 90% monthly to USD 3.4 billion, indicating further pressure on emerging markets currencies.
Weekly Global Bond Market Analysis
US 10-year benchmark bond yields fell sharply by 40 bps to 0.76% last week as Fed cut rates by 50 bps. Weakening global economies and rising risk aversion led to buying of government bonds across the globe.
Eurozone bond yields were down last week. German 10-year bond yields fell by 10 bps last week, France 10-year bond yields fell by 6bps and is at negative 0.35%. Italy’s 10-year benchmark yields were down by 2 bps.
US benchmark Junk bond yield rose by 3 bps and is at 5.82%, Euro benchmark Junk bond yields fell by 9 bps to 3.27%.