Euro Zone Sovereign Debt Crisis Came Into Spotlight After S&P’s Action ::Edelweiss

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Euro Zone Sovereign Debt Crisis Came   Into Spotlight After S&P’s Action

Indian rupee outshined for the second consecutive week amongst the Asian currencies and completed its biggest weekly gains in two-months against the safe haven US dollar, powered by healthy dollar inflows into local currency debt market coupled with positive tone in domestic shares after November industrial production rebounded sharply to 5.9 per cent against upwardly revised 4.7 per cent contraction in October. On a brighter side, Moody's has upgraded India's rating for short-term foreign currency bank deposits from speculative to investment grade also fueled a rally in local unit on anticipation of higher overseas deposit. Meanwhile, underwhelming Italian debt sale on Friday sparked a safety demand as Euro-zone debt fear resurfaced despite Spain sold double the target of its debt on Thursday with almost 1 per cent lower yield. Focus Next Week: Indian rupee is expected to open weaker against the dollar after abrupt sell-off in higher beta currencies mainly in Euro on S&P mass European countries downgrades. However, rupee’s weakness will be depend on the Asian currencies movements on Monday, reacting on Euro fallout and broader risk aversion though Australian and New Zealand dollar stayed firmed against the dollar.  Furthermore, strong dollar inflows into local currency debt markets and expectation of sharp decline in Dec. monthly inflation number would driver local currency higher. The Dec. monthly inflation is forecasted to come in at 7.4 per cent against 9.11 per cent in November.