There were two shades to the Indian rupee over the course of Friday. During the first half, rupee managed to strengthen on the back of inflows in the debt segment, as a result the currency touched a one-month high of 61.30/32 on spot. Rupee was seen trading nearly 10/15 paise under for 1-month forwards on the offshore markets.
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 November’s