The Indian Rupee appreciated by 0.31% against the USD after RBI lowered its inflation forecast and revised upwards its growth outlook, in its recently concluded policy meet. The INR is a likely beneficiary of US – China trade war that continue to drive currency markets. USD will be hit by the Trump talks of tariffs on Chinese goodsand with Fed guiding for a gradual pace of rate hikes, liquidity will flow into emerging currencies with INR being one of the stronger currencies on a macro fundamental basis.
USD managed to end last week higher despite escalating trade tensions between U.S. & China and despite a weak monthly jobs report. The trade tension escalated at a time when market participants were expecting that the levies would be watered down or not be implemented at all. However, President Donald Trump, on Friday, ordered trade representative Robert Lighthizer to consider additional tariffs on USD 100 billion of Chinese imports. In other words, President Trump has doubled down on the trade war causing China to respond by saying it will “counterattack” with great strength if the U.S. moves forward on its new tariff threats. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.15% on a week on week basis and is at a level of 90.11.
U.S. Department of Labour on Friday reported that the U.S. economy created 103,000 jobs in the month of March, well below the 326,000 jobs created in February and against the expectation of 193,000. The jobless rate remained unchanged at 4.1%, against the expectations of 4%. Average hourly earnings grew 0.3% for February, in-line with the expectations.
USD started the week on a lower note on Monday after China increased tariffs on U.S. imports and softer US manufacturing data weighed on sentiments. China announced on Monday that it is increasing tariffs by up to 25% on certain U.S. imports in response to U.S. duties on imports of aluminium and steel. The move intensified trade tensions between the world’s two largest economies.
Fears over the prospect of an all-out trade war escalated on Wednesday after China announced a fresh wave of tariffs on U.S. imports, in retaliation to U.S. President Donald Trump’s new tariffs on its exports. The move comes one day after the Trump administration pushed ahead with plans to slap tariffs on about USD 50 billion of annual imports from China in an attempt to force changes in Beijing’s intellectual property practices.
However, USD pared most of its losses on Thursday after President Donald Trump’s economic adviser Larry Kudlow said proposed tariffs on China may not actually take effect and added that there is no trade war between the U.S. and China. Market sentiment was also helped by hopes that the U.S. could reach a deal with Canada and Mexico over the North American Free Trade Agreement.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 31st March rose by 24,000 to 242,000 from last week’s claim of 218,000 and against the expectation of a rise of 7,000 to 225,000.
The trade deficit which measures the gap between what the United States imports and what it exports widened to USD 57.60 billion in the month of February from USD 56.70 billion in the prior month. Exports in the month were USD 204.45 billion while imports came to USD 262.04 billion.
Asian currencies were mixed last week against the USD. Australian Dollar appreciated by 0.07%. New Zealand Dollar appreciated by 0.36%. Japanese Yen depreciated by 0.61% against the USD and depreciated by 0.27% against the Euro. South Korean Won depreciated by 0.56%, Philippines Peso appreciated by 0.23%, Indonesian Rupiah depreciated by 0.36%, Indian Rupee appreciated by 0.31% against the USD and appreciated by 1.62% against the Euro, Chinese Yuan depreciated by 0.44%, Malaysian Ringgit depreciated by 0.21% and Thai Baht depreciated by 0.32%.