Indian rupee rises on RBI’s gold move

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Updated 05 June 2013
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Indian rupee rises on RBI’s gold move

MUMBAI: The Indian rupee rose yesterday after five days of falls, as further restrictions on gold imports by the central bank helped ease some worries over the country's record current account deficit.
India is likely to raise the cap on foreign investment in sovereign debt by $ 5 billion soon, two finance ministry officials said, a move that may support the sliding rupee and help fund a high current account gap.
The Reserve Bank of India extended the restrictions on the import of gold on consignment basis by banks to all nominated agencies and trading houses.
The rupee lost 4.8 percent of its value in May and was the worst performing Asian currency last month. On the year, the unit is down 2.6 percent.
As the global market tide sweeps the rupee close to an all-time low, raising current account financing and inflation risks, policymakers for now are more likely to use small-scale intervention and administrative measures to defend the currency.
"The gold restrictions and FII limit hike have cheered market participants. There are also some flows expected in June, so we may see some positive for the rupee," said Uday Bhatt, a senior foreign exchange dealer with UCO Bank.
Flows from Unilever Plc, which plans to pay up to $ 5.4 billion to raise its stake in its Indian subsidiary Hindustan Unilever Ltd., are expected in June. The open offer opens on June 21 and closes on July 4.
The partially convertible rupee closed at 56.44/45 per dollar compared with 56.76/77 on Monday, after moving in a wide range of 56.39 to 56.7350 during the day.
"We can't rule out the risk of USD/INR creating new high in the near term as expectation for US QE (quantitative easing) tapering off is likely to remain strong before the September US FOMC meeting," said Ju Wang, a senior foreign exchange strategist at HSBC in Hong Kong.
Fears of a gradual withdrawal of the Fed stimulus were the key reason for a global dollar rally in May, which pushed down almost all Asian currencies.
In the offshore non-deliverable forwards, the one-month contract was at 56.75 while the three-month was at 57.32.
In the currency futures market INRFUTURES, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 56.67 with a total traded volume of $ 5.3 billion.


Weekly Energy Recap: Too early to gauge trade tension fallout on oil markets

Updated 19 August 2018
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Weekly Energy Recap: Too early to gauge trade tension fallout on oil markets

  • Oil prices have moved in narrow band since June
  • Brent/WTI spread widens over week

Brent crude finished the week at $71.83 per barrel while WTI dropped to $65.91 as the Brent/WTI spread widened to $5.92 per barrel.
Oil prices fell as a result of market sentiment impacted by hypothetical fears over lower global economic growth.
Brent crude price fell below $72 for the first time since mid-April 2018.
Oil prices have moved in a narrow band since early June 2018.
The Brent price had been hovering between $73 and $78, until it dropped to nearly a four-month low at the middle of the week, then recovered by the week’s closing.
Oil fell after both OPEC and the International Energy Agency’s (IEA) monthly oil market reports forecasted lower growth in oil demand.
This was claimed to be a result of the major downside risk on economic growth amid US-China trade tensions.
These are reportedly impacting emerging economies across Asia as a strengthening dollar weakens their local currencies, and thus reduces purchasing power for transport fuel.
On the other hand, the IEA reported that oil consumption for plastics and other petrochemicals will keep demand growing and elevated for decades as this is driven by population growth and urbanization.
After oil inventories in the US fell to the lowest level since February 2015, last week, the US Energy Information Administration (EIA) reported an unexpected significant build up in US commercial crude oil inventories of 6.8 million barrels. This brought oil inventories slightly back above the five-year average.
The drawdown in US refined products inventories came on the back of US refineries running at a record capacity. On average they refined 18 million barrels per day for the first time, in order to meet high gasoline demand for the summer season.
This was an increase of 383,000 barrels per day on the previous week’s average.
Analysts are also making much about Saudi Arabia’s output cuts for July 2018. Last month the Kingdom lowered output by 200,000 barrels per day to 10.288 million bpd. My perspective on this is that it has nothing to do with potentially lower economic growth as a result of trade disputes between the US and China, nor emerging market turmoil.
Instead, as the world’s swing producer, the Kingdom must track the output of other OPEC nations and adjust its production accordingly. This is exactly what happened after Libyan oil output recovered and exceeded one million barrels per day for the first time since last June. Consequently, Saudi Arabia reduced production.
Saudi Arabia, as the only swing producer, changes its crude oil production to meet fluctuations in market demand. In reality, it’s far too early to know what influence trade tensions will have on economic growth. It will take time for such impacts to materialize and weigh on the market fundamentals.