Inflation & Covid concerns drives USD higher
USD is hovering around a 16-month high level amid surging inflation and expectations of a potentially more hawkish Federal Reserve. Additionally, data showed U.S. consumers looked past rising prices and drove retail sales higher than expected last month.
U.S. retail sales rose 1.7% in October against the expectations of a 1.4% rise, likely as Americans started their holiday shopping early to avoid empty shelves amid shortages of some goods as the ongoing pandemic squeezes supply chains.
On Friday, USD further gained as market participants sought safe havens after Austria said it would be the first country in Western Europe to reimpose a full lockdown amid surging COVID-19 infections and Germany said it could follow suit, sending the euro lower.
INR higher, falling oil prices offer support
INR manages to end higher despite broad USD strength as falling oil prices & improving covid numbers offered support. However, on the data front, the trade deficit more than doubled in October compared to the same month a year earlier, as imports increased at a much faster pace than exports.
The trade deficit came in at USD 19.73 billion against USD 9.15 billion deficit the same month a year earlier. Exports rose 43.1% to USD 35.65 billion, whilst imports rose 62.5% to USD 55.37 billion. Non-oil imports rose by a lesser 45.9%.
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