Rupee weakens against US dollar on Asian cues, lower GDP estimates

January 9, 2017

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The Indian rupee on Monday weakened against the US dollar tracking the losses in the Asian currencies markets and also on the pessimism on domestic markets following the lower economic growth projections last Friday.
The rupee opened at 68.16 a dollar. At 9.15am, the home currency was trading at 68.20 a dollar, down 0.34% from Friday’s close of 67.96. So far this year it fell 0.4%.
India’s economic growth is likely to decelerate to 7.1% in 2016-17 from 7.6% the previous year while gross value added will be at 7% year on year, according to the Central Statistics Office (CSO) estimates. However, the impact of note ban was not incorporated in the estimate on account of paucity of indicators.
Traders were also worried that the full year gross domestic product may come even lower then the estimates after impact of demonetisation factored in.
“We note that RBI (Reserve Bank of India) in its revised projections has pegged GVA at 7.1% year on year. However, the government estimate mainly uses data for seven months and hence does not capture the impact of demonetization. Nevertheless, just based on the weakness in data in the first half, the second half GDP is also likely to be substantially lower,” said ICICI Bank Global Markets note to its investors.
India’s benchmark Sensex index was trading at 26,860.81 points, up 0.38% or 101.58 points from its previous close. So far this year it gained 0.8%.
Most of the Asian currencies were trading lower after US jobs and wage data for December bolstered expectations for higher Federal Reserve interest rates. There were 156,000 increase in December payrolls followed a 204,000 rise in November that was bigger than previously estimated;
The government will issue index of industrial production and consumer price inflation data for November and December on 12 January. According to Bloomberg analyst estimates, IIP will be at -2.2%, while CPI will be at 3.5%. The government will also release wholesale price inflation data on January.