USD lower as Evergrande news supports risk appetite
USD declined last week despite a steady rise in bond yields, which normally tends to support the currency. The yield on the benchmark 10-year UST has risen by 10 basis points in the course of the week to 1.67%, on fears that this year’s spike in inflation is likely to last longer than first thought.
USD was down despite the release of upbeat economic data as Chinese property giant Evergrande managed to make interest payments, avoiding default for, now boosting risk sentiments.
However, USD pared some of its losses after Federal Reserve Chairman Jerome Powell said the U.S. central bank should begin reducing its asset purchases soon, but should not yet raise interest rates.
Powell said employment is still too low and high inflation will likely abate next year as pressures from the COVID-19 pandemic fade, even as many market participants are concerned that rising price pressures will last longer than policymakers believe.
Data on Friday showed that U.S. business activity increased solidly in October, suggesting economic growth picked up at the start of the fourth quarter as COVID-19 infections subsided, though labor and raw material shortages held back manufacturing.
Data released on Thursday in the U.S. said that existing home sales rose to a rate of 6.29 million units in September, a growth of 7% month-on-month.
INR gains on upbeat market mood
INR trades higher last week amid broad weakness in USD as risk sentiment improved on Friday after Chinese property giant Evergrande managed to make interest payments, avoiding default for now.
Higher oil prices and rising local demand has seen imports rise. India’s trade deficit rose to the highest in at least about 14 years.
We would love to hear back from you. Please Click here to share your valuable feedback