Rupee at 46.40 despite odds

The continued support of RBI to the rupee by its dollar selling has kept the rupee at 46.40 levels and prevented a further depreciation.

The slowing trend in inflow of foreign funds and heavy dollar demand of the importers continues to impact the pessimistic market sentiment. The rupee closed at 46.45, after dipping to a low of 46.52. Rising global interest rates and surging oil prices further impede the government's attempts to attract foreign funds

The dollar fell visa vis the euro to 1.2120 owing to a weak Q2 GDP report and then bounced back and found itself a 100 points higher at 1.2015 with the Chicago PMI release at 56.4 in June. The Chicago PMI is often seen as a barometer for the broader manufacturing sector in the United States, one that is shrinking, but still carries importance, especially in an election year.

German retail sales increased 1.8 per cent in June, which was the strongest rise in a year. An improving labour market and decreasing layoffs have helped boost consumer confidence in Germany. On the other hand in France the unemployment rate increased to 9.9 per cent having a negative effect on French consumer spending.

The sterling is currently at 1.8180 levels. All eyes are on the next week that is to be a big week for UK, as we have a heavy economic calendar that includes industrial production, GDP estimate, manufacturing sector PMI and the Bank of England rate decision. The recent economic data hints that the BoE will have to hike rates again.

The yen is retracing some of its losses and is found in 111.30 levels. Interestingly, the large number of economic data released last night was not the catalyst for the move higher — especially since household spending and housing starts declined. CPI did increase marginally, but primarily as a result of higher oil prices. The yen's gain is attributed to the gains in the Nikkei, which increased 1.88 per cent overnight.