INR weakened beyond Rs 70 against the USD last week. On Thursday, the INR fell below the Rs 70 per USD mark for the first time since March this year. INR came under pressure last week amid broad strengthening of the USD and elevated oil prices. INR depreciated by 0.95% against the USD last week and marginally appreciated by 0.06% against the euro.
The weakness in the INR was in line with the emerging market currencies amid prevailing concerns over the slowing global economy. South Korean won, Thai baht, Indonesian Rupiah, Malaysian Ringgit along with Chinese Yuan were under pressure last week.
USD ended the week higher against major world currencies amid the release of upbeat U.S. economic data, strong corporate earnings and dovish Bank of Japan. Additionally, the fall in Euro and British pound also helped USD to trade higher. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.64% on a week on week basis and is at a level of 98.01. British pound depreciated by 0.59% against the USD last week and Euro depreciated by 0.84% against the USD.
British pound posted its worst week in a month amid a lack of progress on Brexit talks and concerns that U.K. Prime Minister Theresa May’s withdrawal deal will be defeated for a fourth time in a vote in parliament next week.
USD started the week on a higher note, as new home sales surged to a 17-month high, suggesting resilience in the U.S. housing market after disappointing existing home sales numbers. U.S. Commerce Department reported that the new home sales rose 4.5% to an annual rate of 692,000 units last month, the highest level since November 2017. That was well above the expectations for a decline to 647,000 units.
Further, the encouraging reports from companies as diverse as Twitter, United Technologies and Lockheed Martin underpinned the demand for the USD.
USD continued its surge on Wednesday after the Bank of Japan joined its counterpart in Canada in talking down the economic outlook. The BoJ said it would hold off from any interest rate increases for at least another year, sending the USD to a new 2019 high of 112.38 against the Japanese Yen, although it has retreated and ended the week at JPY 111.58.
USD on Friday came under pressure, parings some of the week’s gain, as the release of better-than-expected U.S. first-quarter growth data was offset by slowing inflation. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, slowed to 1.3% in the 12 months through March, from 1.8% in the previous month.
U.S. Commerce Department reported that the gross domestic product increased at an 3.2% annual rate in the January-March period, handily beating the expectations for a 2.0% increase.
Weekly Global Bond Market Analysis
US 10-year benchmark bond yields fell by 6 bps, as Germany economic data dented market confidence. German Ifo Business Climate Index for April fell 0.5 points to 99.2, below market estimate of 99.7. The decline in the Ifo index suggest the German economy momentum is getting weak. On US economic data front, number of Americans filing for unemployment benefits rose by the most in 19 months last week. Initial claims for state unemployment jumped 37,000 to a seasonally adjusted 230,000 for the week ended April 20. Market is also paying attention to reports that Japanese insurers are raising their purchases of US Treasurys and corporate bonds. Japan Post Insurance Co., one of the biggest insurers in the world, said it planned to increase its holdings of U.S. corporate debt for 2019, as domestic Japanese yields remained near ultralow levels.
Germany 10-year benchmark bond yields fell by 4 bps, German 10-year bond yield touched a two-week low and went back to negative territory after Ifo sentiment index fell short of expectations.
Italy 10-year benchmark bond yields fell by 3 bps after credit rating agency S&P affirmed Italy BBB credit rating, two notches above junk, with a negative outlook. S&P said it would consider lowering Italy’s rating within 24 months if it didn’t rein in its debt to GDP ratio, or if there is deterioration in external financial conditions for Italy government and its banks.
Portugal 10-year benchmark bond yields fell by 6 bps, Spain 10-year benchmark bond yields fell by 3 bps.
Japan 10 -year benchmark bond yields fell 1 bps after BoJ said it expected to keep extremely low-interest rates until at least the spring of 2020. BoJ kept its interest rate unchanged, It maintained its target for 10-year Japanese government bond yields at around zero and its short-term deposit rate at minus 0.1%
Emerging economies 10-year benchmark bond yields were mixed last week.
Australia 10-year benchmark bond yields fell by 14 bps to 3-week lows after quarterly Australian inflation figure missed estimates, CPI rose 0.3% quarter-on-quarter in Q1, narrowly missing the estimated rise of 0.4%. The market expects weaker than expected CPI to bolster the chance of rate cuts in RBA upcoming policy meet.
Indonesia 10-year benchmark bond yields rose by 19 bps, South Africa 10-year benchmark bond yields rose by 11 bps, China 10-year benchmark bond yields rose by 2 bps. Russia 10-year benchmark bond yields rose by 2 bps, Brazil 10-year benchmark bond yields rose by 2 bps.
US benchmark Junk bond yields rose by 1 bps to 6.13%, Euro benchmark Junk bond yields rose by 10 bps to 3.24%.