Indian rupee and U.S. dollar banknotes (Photographer: Dhiraj Singh/Bloomberg)

Money Market Watchlist: Inflation, Global IIP Data Likely To Dominate Trade

The rupee on Friday strengthened for the second straight day to close at 65.20 against the U.S. dollar on the back of positive macroeconomic data and upbeat local equities.

Several favorable factors, including encouraging growth-inflation dynamics driven by high industrial growth of 7.1 percent in February, while the retail inflation slipping to a five-month low of 4.28 per cent in March, largely kept the forex market sentiment buoyant.

However, for the week, the Indian unit dropped sharply by a staggering 23 paise against the greenback as global trade war fears and surging crude oil prices weighed on the domestic currency. Asian currencies were trading mixed as traders weighed concern the U.S. will strike Syria with a continued easing in trade tension.

In the meantime, country's foreign exchange reserves hit a life-time high of $424.9 billion after rising by $0.5 billion in the week to April 6, according to the Reserve Bank of India data.

Elsewhere, the U.S. Treasury added India to its watch list of countries with potentially questionable foreign exchange policies, joining China and four others, according to their semi-annual currency report issued last week. The report said India, which has a $23 billion trade surplus with the U.S., “increased its purchases of foreign exchange over the first three quarters of 2017,” although the rupee still rose in value.

On the global front, the dollar posted a weekly loss after rising for two consecutive weeks as it pared some of its gains against yen after the release of negative U.S. economic data and ongoing U.S.-China trade jitters. The dollar index declined 0.3 percent last week, however, it ended steady at 89.80 levels on Friday.

Investors will keep an eye on wholesale price inflation data along with industrial production data globally. Next week’s economic calendar is noticeably light on U.S. issues, the lone high impact report that can evoke some near-term volatility in dollar is Retail sales for the month of March.

Following events are likely to affect the currencies markets in the coming week:

Money Market Watchlist: Inflation, Global IIP Data Likely To Dominate Trade
Money Market Watchlist: Inflation, Global IIP Data Likely To Dominate Trade