Indian Rupee depreciated by 0.81% against USD and by 2.45% against Euro. The sharp fall in INR was witnessed after the release of Union Budget 2018-19 on Thursday, which showed that the government has revised its fiscal deficit target upward to 3.3% of GDP from 3% targeted levels for the fiscal year 2018-19 from a fiscal deficit of 3.5% of GDP for the fiscal year 2017-18 (Revised Estimate from 3.2% budgeted).
USD Index ended the last week of January marginally higher after losing as much as 6% of its value over a 7-week period. All of the major currencies were hit by profit taking with the Australian dollar and Japanese yen experiencing the steepest losses. The gain in USD came after the Fed signalled its confidence on inflation and growth in the U.S, which was backed by upbeat U.S. economic data released last week. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.11% on a week on week basis and is at a level of 89.20.
The Fed said that inflation is likely to rise this year, boosting expectations for further interest rate hikes under incoming Chair, Jerome Powell. The Federal Reserve left rates unchanged on Wednesday largely in-line with the expectations. The meeting was current Fed chair Janet Yellen’s last meet.
USD started the week on a slightly higher note after U.S. GDP data showed that domestic consumption and capital spending were strong even though the headline figure was weaker than expected due to a rise in imports. U.S. economy expanded at a slower-than-projected pace in the fourth quarter on drag from trade and inventories, offsetting strength in consumer spending and business investment that signals solid momentum for the economy. Gross domestic product rose at a 2.6% annualized rate after 3.2% in the prior period.
U.S. economy added more jobs than expected last month, adding to optimism over the strength of the economy. The U.S. Labour Department reported that the economy added 200,000 jobs in the month of January, beating expectations for a 184,000 gain. The unemployment rate remained unchanged at 4.1%, in line with expectations. The report also showed that average hourly earnings rose 0.3% in January, as expected.
U.S. consumer spending rose solidly in December, while the personal consumption expenditures price index, the Fed’s preferred inflation measure of inflation, climbed from 0.1% in November to 0.2% last month. On an annual basis, PCE rose 1.5%, staying below the Fed’s 2% target.
Conference Board’s consumer confidence gauge rose to 125.4 in January from 122.1 in December, beating expectations for a reading of 123.1.
ADP reported on Wednesday that U.S. private payrolls grew by 234,000 for the month, a slight decline from the 242,000 increase in December and against the expectation of 186,000 increase.
Euro appreciated by 0.29% against USD last week after hawkish commentary from European Central Bank Governing Council member Klaas Knot, suggesting that the central bank will end its quantitative easing programme as soon as possible. Eurozone inflation rose 1.3% year-on-year in January, in line with the expectation.
Asian currencies were down last week against the USD. Australian Dollar depreciated by 2.21%. New Zealand Dollar depreciated by 0.68%. Japanese Yen depreciated by 1.44% against the USD and depreciated by 1.67% against the Euro. South Korean Won depreciated by 1.48%, Philippines Peso depreciated by 1.43%, Indonesian Rupiah depreciated by 1.09%, Indian Rupee depreciated by 0.81% against the USD and depreciated by 2.45% against the Euro, Chinese Yuan appreciated by 0.44%, Malaysian Ringgit depreciated by 0.37% and Thai Baht depreciated by 0.36%.