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 Market Bytes News
The Rupee could be stronger initially! (Monday, July 15, 2019)

The Rupee is expected to open slightly higher against the dollar as the Federal Reserve’s dovish monetary policy outlook continued to weigh on the U.S. currency. The rupee will likely trade around 68.54-68.58 to the dollar at opening compared with its previous close of 68.68.
The dollar index was little changed in Asia trading after last week’s decline. The gauge slid about 0.5% last week, weighed by Powell’s comments that indicated that a rate cut is coming.

A quarter percentage rate cut at the July 30-31 policy review is a near certainty, according to Fed fund futures. There is a 1-in-4 chance of a 50 basis-points rate cut. The odds of a Fed rate cut this month have not been affected by the higher-than-expected readings on U.S. retail and wholesale prices. Data released on Friday showed that U.S. producer prices rose by 1.7% last month, compared with the 1.6% pace expected by economists. Earlier last week, data revealed that U.S. core consumer prices quickened by 2.1%, higher than the 2% Fed medium-term target for inflation.

 Meanwhile, the onshore Yuan edged higher against the dollar on Monday following GDP and activity data. China’s economy grew 6.2% in the June quarter, the nation’s National Bureau of Statistics said. That reading was lower than the 6.4% in the January-March period and was reportedly the weakest in more than 25 years, but in-line with estimates of economists polled. China’s June retail sales and industrial output, released alongside GDP numbers, beat forecasts. Asian currencies were mostly higher. Regional equities were little changed or edged lower. Data released after market hours on Friday revealed that India’s retail inflation rate quickened to an eight-month high of 3.18% in June from a year earlier, driven by higher food price. The data was in line with the 3.20% median forecast. Meanwhile, India's industrial output rose 3.1% in May from a year earlier, down from the revised reading of 4.3% in the prior month and below the 3.2% estimated.

GOI bonds are likely to open higher, as easing June core inflation heightened bets of another policy rate cut next month. The yield on the benchmark 7.26% bond maturing in 2029 is likely to trade in a 6.45%-6.50% today. The note ended at 105.41 rupees, yielding 6.49% on Jul. 12. Market participants expect a fourth consecutive rate cut by the Monetary Policy Committee on Aug. 7. The MPC has cut rates by 75 basis points in this calendar year. India will conduct a government bond switch auction worth up to 220 billion rupees today. This will be the fourth bond switch auction of this financial year that started Apr. 1.Indian states will raise 67.5 billion rupees via an auction tomorrow. New Delhi will raise up to 160 billion rupees via Treasury Bills on Jul. 1