Indian Rupee (INR) on Thursday closed just 14 paise or 0.2% away from its all-time lows of Rs 68.80 against the USD, which it hit in Aug 2013. The weakness in the INR was due to continued outflow from bond and equity markets by foreign institutional investors (FIIs). So far this calendar year, FIIs have sold USD 604.90 million in debt and USD 2.38 billion in equity.
Oil losing ground, ‘Brexit’ worries, China setting a weaker Yuan fixing and no positive cues from the G20 summit of finance ministers and central bankers in Shanghai were the main drivers for global currencies last week. High volatility in oil prices hit market sentiments hard during early and mid-part of the week as market feared that any decline in U.S. output would be offset by increased production from Iran sending demand for safe heaven assets higher. Yen got a boost after Bank of Japan Governor Haruhiko Kuroda commented that pace of money printing alone would not boost expectations of future price rises and acknowledged the limits of what monetary policy can do to revive growth.
The INR can touch record lows this week if the markets find that the Union Budget 2016-17 to be presented in Parliament on the 29th of February is not condusive for FII flows. Sensex, Nifty and Ten Year Government Bond can tank as FIIs press sales on a weak budget. However a positive budget with an eye out for containing the fiscal deficit and strengthening the foundation for growth will help bring in flows leading to the INR strengtheneing from close to all time lows.
Euro weakened last week on worries that a possible British exit from the European Union (EU) could damage the Eurozone and its single currency. The concern grew after London Mayor Boris Johnson threw his weight behind the exit campaign. He said that Prime Minister David Cameron had failed to deliver fundamental reforms with the agreement with the EU and that he would advocate Britain leaving the EU. Euro on weekly basis depreciated by 1.76% against USD and GBP depreciated by 1.97% against USD.
USD started the week on a higher note and climbed to three-week high levels on Brexit fears. The release of positive U.S. economic data gave further support to the USD. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 1.60% on weekly basis closing at levels of 96.60.
U.S Commerce Department on Thursday reported that Orders for U.S. durable goods rose more than expected. Data showed that it rose by 4.9% in the month of January from a decline of 4.6% in December and against the expectation of rise of 2.5%.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 20th February rose by 10,000 to 272,000 from the previous week’s total of 262,000 against the expectation of a rise of 8,000 to 270,000.
U.S. Bureau of Economic Analysis on Friday reported that U.S. GDP rose more-than-expected in the last quarter of 2015. Data showed that U.S. GDP rose by an annual rate of 1.0%, from 0.7% in the preceding quarter against the expectation a rise of 0.4%.
U.S. personal spending rose more-than-expected in the month of January. Data showed that it rose by 0.5% from 0.1% in December against the expectation of 0.3%. Further U.S. personal income also rose more-than-expected in the month of January as data showed that it rose by 0.5% from 0.3% in December against the expectation of 0.4%.
Russian Ruble was highly volatile throughout the week as the currency tracked crude oil price trajectory. Ruble depreciated sharply after oil prices declined as ministers from Iran and Saudi Arabia signalled that they’re unwilling to curtail production. Oil prices collapsed to a 12-year low amid global glut and has weakened the Ruble to record low levels, placing Russia’s economy on course for a second year of contraction and forcing the government to consider budget cuts.
Asian currencies were largely mixed against the USD last week. Australian Dollar depreciated by 0.31%, New Zealand Dollar depreciated by 0.05%, Japanese Yen depreciated by 1.2% against USD and appreciated by 0.57% against Euro, South Korean Won depreciated by 0.3%, Philippines Peso appreciated by 0.27%, Indonesian Rupiah depreciated by 0.95%, Indian Rupee depreciated by 0.24% against USD and appreciated by 1.73% against Euro, Chinese Yuan depreciated by 0.28%, Malaysian Ringgit depreciated by 0.12% and Thai Baht depreciated by 0.01%.