Indian two thousand rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Money Market Watchlist: IIP Data, Inflation Readings Globally May Dominate Trade

The Indian rupee fell for the second straight week, ending down by 34 paise at 64.40 against the U.S. dollar. The domestic currency ended near two-month low on Friday due to heavy capital outflows after a steep correction in the domestic equities.

A slew of macro-economic events, including the brutal fall in global equity markets along with the Reserve Bank of India policy outcome, largely highlighted the trading momentum. The RBI kept the interest rate unchanged as widely expected but lowered economic growth projection to 6.6 per cent for 2017-18 from 6.7 per cent on higher inflation expectations.

India’s foreign exchange reserves rose sharply by $4.12 billion to touch a new life-time high of $421.9 billion in the week to Feb. 2, according to RBI data.

On the global front, Asian markets also took its toll on currency market amid speculation that the U.S. Federal Reserve and other major central banks would act quicker to raise interest rates. The dollar index on Friday recorded its strongest week in almost 15 months, after rising 1.45 percent to 90.45 levels. Traders were cautious after 10-year U.S. bond yield climbed to almost 2.9 percent, a key indicator of inflationary pressure and the likelihood of higher interest rates.

The dollar received support after Congress and U.S. President Donald Trump approved a federal budget plan that ended an overnight federal shutdown. The euro was steady against the dollar, and it ended the week down 1.82 percent near $1.22 mark, its largest weekly percentage decline since November 2016.

In the week ahead, investors will remain cautious ahead of the consumer price inflation, wholesale price inflation and index of industrial production data this week. Globally, inflation readings from the U.S., U.K. and Germany will be in the spotlight.

Following events are likely to affect the currencies markets:

Money Market Watchlist: IIP Data, Inflation Readings Globally May Dominate Trade