INR gained 0.23% against the USD last week to close at levels of Rs 65.01.INR had trended lower to levels of Rs 65.40 on the back of global market risk aversion before gaining on Friday. Moody’s rating upgrade of India boosted market sentiments to push the INR higher. INR will see strength more on the back of USD staying volatile though the rating upgrade does help sentiments.
Last week, the USD struggled despite progress on tax reforms and the prospect of a Federal Reserve rate hike next month. The market may be convinced that the Federal Reserve will raise interest rates in December but the most recent economic reports have been far from encouraging. Retail sales growth beat expectations but at 0.2% the increase was weak, especially compared to the 1.9% rise seen in September. CPI also eased due to lower food and energy costs while manufacturing activity in the NY and Philadelphia regions pulled back. However, these numbers won’t stop the Fed from raising interest rates in December, but they could lead to a more cautious guidance for 2019. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.77% on a week on week basis and is at a level of 93.66.
USD started the week on a high note after falling last week due to mounting concerns over the fate of a highly-anticipated U.S. tax reform. The gain on Monday was largely buoyed by a slump in sterling amid reports that UK Prime Minister Theresa May is set to face a leadership challenge while positive comments on tax reforms from President Donald Trump lifted sentiment on the USD. However, on Tuesday, USD came under pressure after Senate Republicans indicated that their tax overhaul plan would be linked to the repeal of a key component of Obamacare, complicating efforts to pass the bill.
USD came under additional pressure on Friday following reports that U.S. President Donald Trump’s election campaign had been subpoenaed for documents in an ongoing investigation relating to possible Russian interference in the 2016 presidential election. Robert Mueller is currently heading an investigation into attempts by the Russian government to meddle in the 2016 election and potential collusion with Donald Trump’s presidential campaign.
U.S. Commerce Department reported that the producer price index increased 0.4% last month and by 2.8% from a year earlier against the expectation for an increase of 0.1% last month and a rise of 2.4% from a year ago.
U.S. consumer prices barely rose in October, adding to concerns over stubbornly low inflation. Data showed that consumer price index rose by just 0.1% in the month of October against the expectation of 0.1%, followed by 0.5% rise in September, which lowers the year-on-year increase in the CPI to 2.0% from 2.2% in September. The core CPI rose by 0.2% in the month of October that lifted the year-on-year increase in the core CPI to 1.8%.
The Commerce Department reported that retail sales increased by 0.2% in October against the expectation of an unchanged reading, followed by 1.9% rise in September. Retail sales increased 4.6% on an annual basis.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 11th November rose by 10,000 to 249,000 from previous week’s total of 239,000 against the expectations of a decline by 4,000 to 235,000.
Euro appreciated by 1.07% against the USD last week as solid euro zone growth data offered further evidence that the region’s economic recovery remains on track, supporting the European Central Bank’s move to begin reducing its bond-buying program. Data showed that the eurozone economy grew by an annualized 2.5% in the third quarter, outstripping growth in the U.S. economy, largely on the back of Germany economic growth, which grew by 0.8% in third quarter of the year against the expectation of a 0.6% rise. Further, on data front, euro zone consumer prices rose at an annual rate of 1.4% in October, down from 1.5% in September and still below the ECB’s target of close to 2%.
Asian currencies were largely higher last week against the USD. Australian Dollar depreciated by 0.09%, New Zealand Dollar depreciated by 1.85%, Japanese Yen appreciated by 1.28% against the USD and appreciated by 0.17% against the Euro. South Korean Won appreciated by 1.77%, Philippines Peso appreciated by 0.59%, Indonesian Rupiah appreciated by 0.09%, Indian Rupee appreciated by 0.23% against the USD and depreciated by 1.14% against the Euro, Chinese Yuan appreciated by 0.21%, Malaysian Ringgit appreciated by 0.74% and Thai Baht appreciated by 0.82%.