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Global Currency Markets Attained Some Stability In First fortnight of August: Report

"Intuitively the Fed hardening interest rates to slow down the economy automatically reduces the strength of the dollar and this has lent a hand to other currencies," it said

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After a rather volatile period of 2 months, the global currency markets attained some semblance of stability in the first fortnight of August, said the Bank of Baroda in a report. 

The report said that the dollar had come close to the parity level and the question asked was whether this level would be broken. 

"Intuitively the Fed hardening interest rates to slow down the economy automatically reduces the strength of the dollar and this has lent a hand to other currencies," it added. 

The report also mentioned that the dollar effect, which played a major role in guiding the rupee past the 80 mark, is now more moderate and we can keep watching our fundamentals for further direction. 

"The rupee has been largely stable on a point-to-point basis which has been the case with other currencies too," it said. 

The pound and yen depreciated above 0.5 per cent while the euro went down by 27 bps. The Australian dollar, real, rupiah, Mexican peso, ruble, rand and baht appreciated with the ruble going up by 2.4 per cent

"The Indian story was largely driven by the FPI movements which turned positive for equity on all days while aggregating positive for debt over this period. Hence, the net inflows were positive which made up for the shortfall in trade which was impacted by imports rising faster than exports," as per the report. 

Talking about the rest of the month, it is expected that the rupee will trade in the Rs 79.25-79.75/ USD range. The global oil price has come down now to less than the USD 100 mark which is good news as it will automatically lower the trade deficit besides potential inflationary pressures. 

The Ukraine war though largely unresolved has probably played out the darker side with the global economy adjusting to the supply dynamics. The shock was absorbed in a period of 6 months. 

"Taiwan did ring a scare but seems to be behind us now. The focus will be on what global central banks do in the coming months and though the direction is clear and a slowdown imminent, the approach will provide further clues to the currency markets," it added. 


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global currency markets india economy