INR extends weekly losing streak amid equity selloff; USD remains strong ::Edelweiss, link

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The week that was...

• The rupee hit a nine-month low as weak global and domestic equities kept it under pressure. RBI was seen intervening by selling dollars via state run banks and exporters booked receivables as they found the levels above $62.30 attractive. The Indian currency was down by ~0.84% for the week amid continued global strength in US dollar. Strong FII flows sent the benchmark 10-year bond yield below 7.90% - lowest in 16 months, mainly driven by weak crude oil which fell below $60 (losing more than 40% since the start of the year). FIIs have now sold $141.5 million worth of shares in Indian markets in the last 3 sessions. The Nifty has fallen 4.7% so far this month, putting it on track to snap two months of gains.
• Markets were awaiting the release of IIP and CPI numbers, which came post market hours on Friday. Industrial activity for October contracted 4.2% YoY while CPI came in as per expectations. Weak IIP growth could push RBI to cut policy rates sooner rather than later to spur growth in the industry sector which is struggling despite improved macro-economic sentiment since the Lok Sabha polls.
• US dollar recorded a 10.5% weekly gain against the ruble, its largest in six weeks, as WTI crude extended its decline. Crude dropped further on Friday after the US Energy Information Administration said that it expects production to increase in 2015. Japanese yen witnessed marginal gains against major global currencies amid speculation that traders were locking in profits after Prime Minister Shinzo Abe’s victory in weekend elections. Abe now has a fresh mandate for his radical economic policies that have driven Japan’s currency to a seven-year low.

Currency Outlook for This Week

• The rupee is likely to trade with a negative bias, as weak Asian and global equity indices coupled with disappointing IIP data will keep it under pressure. Markets for the week will also brace for WPI inflation data. The Indian currency closed above the important resistance of 62.20 in spot for the first time in nine months. USDINR spot will continue its upward trajectory till it holds above the key level of 62.20 in spot market.
• Strong annual gains in domestic equities, improvement in domestic macro fundamentals, stable FII flows, weak international crude oil basket and exporters’ selling will keep the rupee’s fall limited.

LINK
https://www.edelweiss.in/research/INR-extends-weekly-losing-streak-amid-equity-selloff;-USD-remains-strong/10005312.html