INSUBCONTINENT EXCLUSIVE:
By
Gaurang SomaiyaThe rupee has fallen to fresh record lows after a surge in global oil prices and on expectations that it could start
hurting India’s import bill
The slide was triggered chiefly by July’s trade deficit that widened to $15.8 billion on the back of pricier oil
Last week, volatility in the dollar was curbed, but a mixed set of economic numbers from the US kept the greenback under pressure
On the domestic front, market participants have been cautious and weakness in the rupee has raised expectations that the RBI could consider
raising interest rates twice this year, once in October and another in December
This week, inflation and industrial production numbers are taking focus
But importantly, investors are digesting the inflation print to firm up a view on the currency
As a whole, we expect the rupee to remain under pressure against the dollar.
The euro gained marginally against the dollar after German and
Euro zone manufacturing PMI numbers for August came in better than estimates
But a major trigger for the currency came in after non-farm payroll data for August showed that the economy added 2,01,000 jobs in August
compared with 1,47,000 in the previous month
On the other hand, average hourly earnings rose marginally by 0.4 per cent in August against a growth of 0.2 per cent in the previous
month, keeping hopes alive for two more US rate hikes this year
This week, from the euro zone, market participants will be keeping an eye on the ECB policy statement
Any hawkish comments from the governor could support the euro at lower levels.
Japanese yen rose in the first half of the week, but gains
were limited following uncertainty surrounding the announcement of the US imposing import tariff on Chinese goods worth $200 billion
Safe haven buying was also seen ahead of the key negotiations between the US and Canada on the NAFTA deal
But gains for the currency were limited after the US President hinted at taking trade war to Japan
Discussions between both the countries have begun and the President expects that a deal should get through
Trump, who is already challenging China, Mexico, Canada and the European Union on trade issues, has expressed displeasure about his
country’s large trade deficit with Japan, but had not asked Tokyo to take specific steps to address the imbalance
Japanese yen overall is consolidating in the range of 110.50 and 111.50 and break above this level could give a clear trend to the
currency.
(The writer is Currency Analyst, MOSL)
