Today's Currency News : 07.11.2019
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Rupee recovers but trade lower at 71.02 per dollar
The Indian rupee has erased some of its morning losses but trading lower by 4 paise at 71.02 per dollar, with buying seen in the domestic equity market which took Nifty above 12,000 in the morning trade. It opened lower by 7 paise at 71.05 per dollar on Thursday versus previous close 70.98.
On November 6, Indian rupee declined 29 paise to close at 70.98 against the US dollar. However, weakening of the US dollar vis-a-vis other currencies overseas and easing crude oil prices restricted the fall. The Sensex is up 68.92 points at 40,538.70, and the Nifty up 14.40 points at 11,980.40.
“From the past 3-weeks, the spot has been in a depreciating mode, as US-China have been showing the curiosity and hinting at a ‘Phase One’ deal anytime this month. However, depreciation is getting capped as market has started getting doubtful of the silence amid China’s attempts to push the US to remove more tariffs, said Rahul Gupta, Head of Currency, Emkay Global Financial Services. "If this silence continues then we can see more appreciation in spot. Past couple of days, movement in spot has been very sideways, within 70.50-71. If 71, breaks then we can see a rally towards 71.15,” he added.Oil prices were unchanged on Thursday, holding on to most of their losses from the previous session, on worries that a long-awaited interim deal to dial back a crippling US-China trade war could be delayed. Worries that a long-awaited trade deal between the United States and China could be delayed until December made investors cautious, keeping gold prices steady on Thursday.
Slowing Indian economy spells tough times ahead for the rupee: Poll
A slowing domestic economy will prevent India's rupee from recouping this year's losses against the dollar in 2020, with optimism around an easing in the US-China trade dispute not enough to give it a further boost, a Reuters poll showed. After falling nearly 9% in 2018, the Indian currency has shed another 4% this year to touch a 2019 trough of 72.40 per dollar on Sept 3. It has since popped up over 2%, along with other emerging market currencies, on hopes of a possible trade deal between the world's two largest economies. But nothing has been agreed yet, let alone a meeting scheduled.
A barrage of rate cuts from the Reserve Bank of India this year - five reductions in succession for a total of 135 basis points off the repo rate, now at 5.15% - has done nothing concrete so far to revive a slowing Indian economy. Neither have several government fiscal stimulus measures introduced this year, which have become a negative for the rupee's outlook given it will be difficult for Prime Minister Narendra Modi's government to meet its fiscal deficit targets. "We expect the INR to weaken as risks of sluggish growth and fiscal slippage intensify," said Rini Sen, India economist at ANZ.
"Stable portfolio flows led by equities and global cues like trade negotiations, on top of rate cuts, have led to bouts of optimism. However, we think the currency market is under-pricing downside risks to domestic growth." The Nov. 1-6 Reuters poll of over 40 strategists predicted the rupee <INR=> to weaken about 1.3% to 71.90 against the greenback in 12 months from around 71.00 on Wednesday. The RBI, the most aggressive major central bank in the world this year for easing, is expected to cut the repo rate at its sixth meeting in a row in December, a Reuters poll showed last month, which could put further pressure on the currency. "Unlike the previous cuts, additional cuts could erode the allure of the rupee as a higher yielder, while (the) growth prospect remains a concern," said Saktiandi Supaat, head of foreign exchange research at Maybank based in Singapore.
Indian economic growth has steadily slowed to a six-year low of 5.0% in the April-June quarter from an 8.1% peak in the January-March quarter of 2018 and recent business surveys indicate it will slow further.While the year-ahead consensus in the latest poll was slightly stronger than 72.50 per dollar predicted last month, it reflects the currency's gain over the past month. However, nearly two-thirds of 24 common contributors in the October and November Reuters polls either downgraded or kept their year-ahead forecasts unchanged. Currency speculators have cut short bets on the rupee to the lowest since mid-August, a separate Reuters poll showed. The rupee's outlook was also driven by renewed interest among foreign portfolio investors for Indian assets. They bought 160.69 billion rupees of Indian securities in October, the highest in six months, according to Foreign Portfolio Investors' data. "If whatever measures taken by the government so far do not result in improving the onshore growth scenario, then there is risk that whatever portfolio flows which have come so far might reverse...and could result in INR weakness," said Rohit Garg, emerging market FX strategist at BofAML based in Singapore.
On November 6, Indian rupee declined 29 paise to close at 70.98 against the US dollar. However, weakening of the US dollar vis-a-vis other currencies overseas and easing crude oil prices restricted the fall. The Sensex is up 68.92 points at 40,538.70, and the Nifty up 14.40 points at 11,980.40.
“From the past 3-weeks, the spot has been in a depreciating mode, as US-China have been showing the curiosity and hinting at a ‘Phase One’ deal anytime this month. However, depreciation is getting capped as market has started getting doubtful of the silence amid China’s attempts to push the US to remove more tariffs, said Rahul Gupta, Head of Currency, Emkay Global Financial Services. "If this silence continues then we can see more appreciation in spot. Past couple of days, movement in spot has been very sideways, within 70.50-71. If 71, breaks then we can see a rally towards 71.15,” he added.Oil prices were unchanged on Thursday, holding on to most of their losses from the previous session, on worries that a long-awaited interim deal to dial back a crippling US-China trade war could be delayed. Worries that a long-awaited trade deal between the United States and China could be delayed until December made investors cautious, keeping gold prices steady on Thursday.
Slowing Indian economy spells tough times ahead for the rupee: Poll
A barrage of rate cuts from the Reserve Bank of India this year - five reductions in succession for a total of 135 basis points off the repo rate, now at 5.15% - has done nothing concrete so far to revive a slowing Indian economy. Neither have several government fiscal stimulus measures introduced this year, which have become a negative for the rupee's outlook given it will be difficult for Prime Minister Narendra Modi's government to meet its fiscal deficit targets. "We expect the INR to weaken as risks of sluggish growth and fiscal slippage intensify," said Rini Sen, India economist at ANZ.
"Stable portfolio flows led by equities and global cues like trade negotiations, on top of rate cuts, have led to bouts of optimism. However, we think the currency market is under-pricing downside risks to domestic growth." The Nov. 1-6 Reuters poll of over 40 strategists predicted the rupee <INR=> to weaken about 1.3% to 71.90 against the greenback in 12 months from around 71.00 on Wednesday. The RBI, the most aggressive major central bank in the world this year for easing, is expected to cut the repo rate at its sixth meeting in a row in December, a Reuters poll showed last month, which could put further pressure on the currency. "Unlike the previous cuts, additional cuts could erode the allure of the rupee as a higher yielder, while (the) growth prospect remains a concern," said Saktiandi Supaat, head of foreign exchange research at Maybank based in Singapore.
Indian economic growth has steadily slowed to a six-year low of 5.0% in the April-June quarter from an 8.1% peak in the January-March quarter of 2018 and recent business surveys indicate it will slow further.While the year-ahead consensus in the latest poll was slightly stronger than 72.50 per dollar predicted last month, it reflects the currency's gain over the past month. However, nearly two-thirds of 24 common contributors in the October and November Reuters polls either downgraded or kept their year-ahead forecasts unchanged. Currency speculators have cut short bets on the rupee to the lowest since mid-August, a separate Reuters poll showed. The rupee's outlook was also driven by renewed interest among foreign portfolio investors for Indian assets. They bought 160.69 billion rupees of Indian securities in October, the highest in six months, according to Foreign Portfolio Investors' data. "If whatever measures taken by the government so far do not result in improving the onshore growth scenario, then there is risk that whatever portfolio flows which have come so far might reverse...and could result in INR weakness," said Rohit Garg, emerging market FX strategist at BofAML based in Singapore.
