However, as the day progressed and the European session got under way, domestic equity markets showed signs of strain and the domestic bond market too pushed the yields higher. At the same time, US dollar gained further ground against the commodity currencies like Aussie Dollar, Kiwi Dollar and the Loonie. The weight of inter-market was too much to ignore for the rupee, which saw a sharp reversal towards 61.60 by close of trading. Oilers were on the bid for the US dollars at lower levels.
Economic data mixed as:
(1) Bad loans held by Spanish banks rose in November for the 10th consecutive month. Non-performing loans stood at 13.07% of all loans in November, up from 13% in October. Bad loans amounted to 192.5 billion ($262 billion) in November,
up from 190.9 billion in the previous month.
(2) Strong growth in sales in smaller stores helped British retailers report the fastest annual sales growth in more than nine years last month. British retail sales jumped by 2.6 percent in December to show an annual rise in volumes of 5.3 percent, the fastest growth since October 2004
(3) Fitch Ratings has warned that structural pressures in the Chinese banking sector are likely to persist as government efforts to curb shadow banking still have a long way to run. Chinese regulators have tried in the past to clampdown on the credit creation from this sector. However, non-traditional sector continue to churn sizable amount of credit in the Chinese economy. There are reports of stress developing in this part of the financial economy.
(4) The pace of U.S. home construction dropped less than forecast in December as housing starts fell 9.8 percent to a 999,000 annualized rate following Novembers revised 1.11 million pace.
(5) Industrial production in the U.S. rose for a fifth month in December but U.S. consumer sentiment slipped in its first January measure, weighed by lowered expectations among lower- and middle-income families.
(6) The JOLTS report on number of job opening for the month of November in US ( a data closely watched by the US Fed to gauge the health of the employment in the country) showed that the number of opportunities have climbed to a 68-month high at 4 million. The Job Openings and Labour Turnover report is a signal that the labour market is still slowly on the mend. It is also comes with a hint of a suggestion that the Federal Reserve can continue tapering its bond buying activities.
Over the next week we can see more ranged activity between 61.00 and 62.00 on spot. In case, USD/INR manages to capitalise on the last Friday upward reversal from 61.3, then we can see a move develop towards 61.70/80 levels, which if gets enough inter-market fodder, can even extend towards 62.00/62.10 levels as well. However, a failure to hold above 61.30, can mean that the down trend can take prices towards 61.00/60.80 on spot.
By Anindya Banerjee
Note: The views expressed are those of the author