US Dollar Resilience Forces AUD/USD below 75.00 and Indian Rupee Skyrocketing

Despite what has been described by CNBC as a “shocker” of a US jobs report on Friday and a US attack on Syria – a move certain to have geopolitical ramifications – the US dollar ended the week strongly.

Against the Japanese yen, the dollar fell toward 110.10 early in the day on news of a US missile strike on a Syrian airbase and, having recovered in the interim, fell again to that level following weak payrolls data. Remarkably though, the ‘greenback’ flew from there, dismissing negativity and rallying at one point to 111.36. USD/JPY ended the week at 111.05.

Similar moves were recorded in other US dollar pairs yesterday and the Australian dollar continues to be the worst major performer. AUD/USD opened near its highs and closed virtually on its low (never a good sign), and towards the end of the day even managed to breach the crucial 75.00 level. AUD/USD ended the week at 0.7501.


Weather to Blame for Poor US Jobs Data

Not only did the headline employment number for March miss market expectations by a long way (+98k vs. +174k expected), but there was also a revision of -38k to previous data and average hourly earnings ticked down (+0.2% vs. +0.3% previously).

Diane Swonk, CEO at DS Economics, and John Hardy, Head of FX Strategy at Saxo Bank, both suggested that “wacky weather” was to blame for the fall in jobs. And both David Berson, chief economist at British building society Nationwide, and JP Morgan’s Jim Glassman said yesterday that Friday’s data would have no bearing on the prevailing stance and opinions of the Federal Reserve. The weak March data “won’t knock the Fed off course”, said Berson.


Indian Rupee Making a Mockery of Big Bank Forecasts

The rupee continues to skyrocket. Another very strong showing from the Indian currency yesterday means that the New Zealand dollar now buys only INR 44.59, the US dollar only INR 64.30 and the British pound only INR 79.50. Those importing goods from India might soon be feeling the pinch. On the flip side, Indians looking to travel overseas haven’t had it this good since 2015.

The Reserve Bank of India kept rates on hold this week, with the committee noting that “indicators of global growth suggest signs of stronger activity…and an easing of recessionary conditions in large emerging market economies [such as India]. For emerging markets, the outlook is gradually improving, with indications that the slowdown characterising 2016 could be bottoming out.”

Economic data coming from India continues to surprise to the upside and be supportive of higher INR rates. In March, investors learned that CPI in India has reached 3.65% and that wholesale prices rose 6.55%, with both numbers beating market expectations for 3.58% and 5.9% respectively. The most recent GDP data also comfortably outperformed the market’s best guess, and now stands at 7% year-on-year.

The rupee is also making a mockery of forecasts made by major investment banks. Back in February, Swiss bank Credit Suisse raised their Q1 forecast for INR/USD (as did many other banks) from 0.0146 to 0.0148. The pair actually ended the quarter at 0.0154 and as of Friday sits at 0.0156.

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