Weekly Currency Report, Saturday, August 4, 2012

After witnessing a modest appreciation in the last week, we saw Indian rupee weakening against the US dollar this week. The important events such as RBI monetary policy, FOMC meet and the ECB meet were driving the currency market. The Central bank could not do much in its monetary policy review to calm down the weakening rupee, as it is more concerned about the rising inflation rate which is above 7%.

There were some cautious moves in the local market, as market participants were expecting some positive outcomes from the ECB after the US Federal reserve failed to give clear signs over QE3. However, the ECB president also failed to provide a boost to the markets, as he failed to come out with ways to solve the region’s debt crisis. This made the Indian rupee to lose momentum against the US dollar as euro started falling modestly.

Along with the global cues, domestic fundamentals also put pressure on the rupee. India’s manufacturing PMI dropped compared to last month’s figures, mainly on account of sluggish exports and slumop in the output. Slowing growth in China also added on the negativity in the Indian markets.

(Source: Corporate Communications Team, India Forex Advisors Pvt. Ltd.)