USD/INR: Rupee Modest Gains in Final Stretch of 2019

India’s Rupee was on the offensive on Monday, closing modestly higher in a final stretch before the year end. On the interbank market, the value of Rupee appreciates by 10 paise at the end of the first trading day of the week and settled higher at 71.30 against the US dollar.

During the early Asia trading hours, the USD/INR exchange rate was seen quoted within a range of 71.31 — 71.24. Indian Rupee has gained 2.22% against the greenback in 2019 however, most emerging market currencies have been depreciating against the greenback. The weakness in the Asian currencies was mainly driven by the US — China trade war and the tit for tat tariffs.

The dollar index, which gauges the greenback’s strength against a basket of major currencies, traded lower on Monday and settled at 96.74. 

Elsewhere, foreign institutional investors (FIIS) were net sellers of shares in the local equity market worth Rs -130.52 crore; according to the National Stock Exchange of India data published at the end of Friday’s trading session. At the same time Domestic institutional investors were net buyers, investing Rs 201.32 crore. 

India’s macroeconomic landscape is painting a gloomy economic outlook for 2020. Modi’s government fight against the economic slowdown is likely to widen the fiscal deficit in 2020. However the extend of the fiscal imbalances will be revealed when the Union Budget will be presented on 1st February.

Elsewhere, the Reserve Bank of India conducted its own “Operation Twist” through simultaneously buying and selling of government securities under the Open Market Operations (OMO) worth Rs 10,000 crore. The OMO’s aim is to adjust the Rupee liquidity conditions.

The domestic benchmark equity index NIFTY 50 traded almost unchanged and settled at 12, 2455 by the end of Monday’s trading session. During early Asia trading hours NIFTY 50 was seen quoted around the 12,195 level. Year-to-date the Indian stock market has gained 12.53%, benefiting from net foreign investment inflow.

The Indian 10-year government bond yield was seen quoted at 6.54% in morning trade compared with its previous close of 6.55%.

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