The INR fell 1.88% against the USD last week on the back of rising global risk aversion on Greece and on the back of MAT (Minimum Alternate Tax) demand on FIIs that prompted FII selling in Indian equites and bonds. INR fell to levels of Rs 63.57 , which were last seen in end December 2014. RBI was seen selling USD to prevent the INR from depreciating sharply.
RBI had however sounded its worries on the relative strength of the INR that was hampering export growth. Exports for fiscal 2014-15 were down 1.23% on year on year basis. The INR is one of the best performing currencies over the last one year. RBI had cut the Repo Rate in March citing export competitiveness of the INR as one reason for the rate cut.
RBI may have intervened to prevent excessive volatility but this intervention goes against its worries of the export competitiveness of the INR. The Central Bank should let the INR find its own level as once the Greece and MAT issues are sorted out, the currency may well bounce back.
USD remained broadly lower last week after the release of disappointing initial Jobless claims data, which along with the previous to last week’s release of weak U.S. economic data, gave rise to expectations of delay in Fed rate hike. USD Index (DXY), which tracks the movement of the USD against six currencies, posted a decline of 0.61% in the last week. On yearly basis USD has strengthened by 22.16%.
USD came under heavy selling pressure paring its early gains last week after U.S. Department of Labour on Wednesday reported that initial jobless claims for the week ended 18th April increased by 1,000 to 295,000 from the previous week’s total of 294,000 and against the expectations of decline of 4,000 to 290,000.
On Wednesday, U.S. National Association of Realtors reported that existing home sales rose by 6.1% to 5.19 million units in the month of March against the expectations of 3% rise.
A separate report showed that U.S. new home sales declined by 11.4% to 481,000 units in the month of March from 541,000 units in February and against the expectations of decline of 5.3% to 513,000 units.
Data released on Friday showed that U.S. durable goods orders increased by 4% in the month of March beating the expectations of 0.6% rise. U.S. durable goods orders rose by 1.4% in February. Core durable goods orders, which exclude transportation items declined by 0.2% last month against the expectation of 0.3% rise.
Euro appreciated by 0.62% in the last week against the USD even as Greece seems to be no closer to reaching any agreement with its Eurozone partners and IMF, which is required to secure access to bailout funds, giving rise to concerns that Greece might be forced out of the Eurozone. The Euro found support after Institute of Economic Research reported that Germany’s (the largest economy in the Eurozone) business climate index rose to a 10-month high of 108.6 in April from 107.9 in March, beating expectations of an uptick to 108.4.
Brazilian Real continued its winning streak for the fourth successive week as the currency advanced by 3.03% against the USD last week. The gain is largely due to the easing of concernss that corruption allegation in the state run Oil Company Petrobras would lead to junk credit rating of the nation.
Russian Ruble appreciated by 2.14% against the USD. The currency found support from the rise of Crude oil prices and easing of geopolitics concerns. Crude oil in the last week gained by 3% from 63.45 USD/bbl to 65.28 USD/bbl.
Asian currencies were broadly down against the USD last week. Japanese Yen declined by 0.08%, Philippines Peso declined by 0.09%, Indonesian Rupiah declined by 0.56%, Thai Baht declined by 0.66% and Indian Rupee declined by 1.88% against the USD and by 2.56% against the Euro whereas Australian Dollar appreciated by 0.54%, South Korean Won appreciated by 0.38% and Chinese Yuan appreciated by 0.05%.
Australian Dollar gained as CPI data released on Wednesday matched expectations. CPI for the first quarter rose by 0.2%, and on annual basis, CPI gained 1.3%. Japanese Yen declined marginally despite March trade data showing a surplus of USD 1.9 billion. Exports rose 8.5%, matching expectations and imports declined 14.5%.