The INR on Thursday fell to its all-time low levels of Rs 68.80 to the USD seen in August 2013 and is currently trading at a level of Rs 68.4725. A sustained strength in the USD is pulling INR down along with other emerging currencies. However, the USD/INR forward premia has come off sharply in recent weeks as markets now believe that INR has fallen enough and are unwilling to take forward bets on further sharp falls.
USD posted its third consecutive weekly gain and has appreciated by 6% against Japanese Yen and nearly 4% against the Euro in a matter of three weeks. USD Index reached its highest level in 14 years on Thursday but on Friday there was slight pullback. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.28% on a week on week basis and is at a level of 101.49.
USD started the week on a positive note as market participants continued to bet on expectations that President-elect Donald Trump’s administration would adopt expansionary fiscal policies, which will boost inflation and growth in the economy and will lead to faster Federal Reserve interest rate hikes. The sentiment received a further boost after release of upbeat U.S. economic data including existing home sales, durable goods and University of Michigan consumer sentiment index. Next week’s economic data to be release includes consumer confidence, ISM manufacturing index and nonfarm payrolls.
Minutes of the Fed’s November FOMC meeting, which was the last one ahead of the election was released on Wednesday and has pointed to an imminent rate increase.
Data reported on Tuesday showed that U.S. existing home sales rose in October to its highest level in more than 9-1/2 years. Data showed that home resales rose by 2.0% in the month of October to 5.60 million units against the expectation of a decline of 0.5% to 5.43 million units, existing home sales was at 5.49 million units in September
U.S. Commerce Department on Wednesday reported that U.S. durable goods orders in the month of October rose more than expected. Data showed that the order rose by 4.8% in the month of October against the expectation of a rise of 1.5%, followed by a rise of 0.4% in September.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 19th November increased by 18,000 to 251,000 from previous week’s total of 233,000 against the expectation of a rise of 15,000 to 250,000.
The University of Michigan on Wednesday reported that U.S. UoM consumer sentiment index rose unexpectedly to 93.8 in the month of November against the expectation of an unchanged reading from the previous months w reading of 91.6.
British pound appreciated by 1.09% against USD last week as market read U.K. budget as more growth supportive than was expected. While the Chancellor lowered growth forecasts for the next 2 years, he promised more borrowing and investment in innovation and infrastructure. He announced a new National Productivity Investment Fund of 23 billion pounds and plans to double UK Export Finance to make it easier for British businesses to export. Further on Brexit front Prime Minister May reiterated her plans to trigger Article 50 by March 2017 and exit the EU by March 2019.
Japanese Yen depreciated the most against USD, the sharp depreciation came late on Monday after Japan Meteorological Agency said that an earthquake with a preliminary magnitude of 7.3 hit northern Japan which boosted the demand for USD and Euro against the Yen. Japanese Yen depreciated by 2.04% against USD and by 1.99% against Euro last week.
Asian currencies closed mixed against the USD. Australian Dollar appreciated by 1.43%, New Zealand Dollar appreciated by 0.47%, Japanese Yen depreciated by 2.04% against the USD and by 1.99% against the Euro. South Korean Won appreciated by 0.48%, Philippines Peso depreciated by 0.11%, Indonesian Rupiah depreciated by 0.72%, Indian Rupee depreciated by 0.49% against the USD and by 0.21% against the Euro, Chinese Yuan depreciated by 0.47%, Malaysian Ringgit depreciated by 0.9% and Thai Baht depreciated by 0.17%.