Major Forex News
India Rupee Nears Record Low, Bonds Drop on Fed Stimulus Concern
India’s rupee weakened to within 0.4 percent of its record low on concern steps taken by policy makers to steady the currency will prove insufficient as the U.S. prepares to pare stimulus. Government bonds fell.
The Bloomberg Dollar Index touched a one-week high before data forecast to show manufacturing in the New York region expanded at the fastest pace in six months and claims for U.S. jobless benefits declined. India’s government this week announced measures to contain a record current-account deficit by curbing imports and boosting capital inflows. The Reserve Bank of India began weekly sales of cash-management bills to further tighten liquidity and buoy the rupee.
The rupee fell 0.4 percent to 61.4450 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency, which plunged to a record 61.805 on Aug. 6, touched 61.5750 earlier. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped six basis points to 12.54 percent. India’s financial markets will be shut tomorrow for Independence Day.
Global funds have cut holdings of Indian debt by $10 billion since May 22 when Federal Reserve Chairman Ben S. Bernanke first signaled the U.S. may reduce bond purchases this year.
India raised import duties on gold and platinum to 10 percent from 8 percent, while the levy on silver was increased to 10 percent from 6 percent, according to a Ministry of Finance notification tabled in parliament yesterday. The government will also seek to boost capital inflows with measures including allowing state-
owned financial companies to issue “quasi-sovereign” bonds to finance long-term infrastructure investment, Finance Minister Palaniappan Chidambaram said Aug. 12.
Official data today showed wholesale prices rose 5.79 percent last month from a year earlier, compared with the 7 percent median estimate in a Bloomberg survey. The rate was 4.86 percent in June. A weaker rupee stokes inflation as India imports about 80 percent of its oil.
The yield on the 7.16 percent government bonds due May 2023 rose 10 basis points, or 0.10 percentage point, to 8.50 percent, according to prices from the central bank’s trading system. That’s the highest rate on a 10-year bond since May 2012.
Three-month onshore rupee forwards fell 0.3 percent to 62.87 per dollar, data compiled by Bloomberg show. Offshore non-deliverable contracts fell 0.4 percent to 62.86. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.
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Market News
Gold Bull Paulson Cuts SPDR Stake by Half in Bear Market
Billionaire hedge fund manager John Paulson, own gold, cut his holdings in the metal by more than half as prices plunged into a market. Paulson & Co., the largest investor in the SPDR Gold Trust, the biggest exchange-traded product for the metal, pared its stake to 10.2 million shares in the three months ended June 30 from 21.8 million at the end of the first quarter,. The New York-based firm, which manages $18 billion, cut its ownership for the first time since 2011 due to a reduced need for hedging. The hedge fund is following other money managers who have been more aggressive in getting out as investors lost faith in gold as a store of value. Prices plunged by a record 23 percent in the second quarter as U.S. equities rallied and inflation was muted, while the Federal Reserve suggested it will reduce fiscal support for the economy. Billionaires George Soros and Daniel Loeb sold their entire SPDR stakes in the past quarter, U.S. Securities and Exchange Commission filings showed.
WTI Oil Rises a Fifth Day as Egypt Unrest Boosts Concern
West Texas Intermediate crude rose for a fifth day, the longest stretch of gains since April, as worsening unrest in Egypt bolstered concern that Middle East supplies may be cut. Brent oil climbed to a four-month high.
Futures advanced as much as 1 percent in New York after Egypt declared a state of emergency and more than 500 people were killed as security forces broke up sit-ins. The country controls the Suez Canal, which is used by tankers carrying oil to Europe and North America from the Arabian Peninsula. WTI retreated and equities tumbled after falling U.S. jobless claims raised concern that the Federal Reserve will trim stimulus.
Oil is rallying on the eruption of violence in Egypt, Equities are getting pounded, which is putting downward pressure on the market. WTI is caught between these opposing forces.
WTI crude for September delivery increased 66 cents, or 0.6 percent, to $107.51 a barrel at 11:12 a.m. on the New York Mercantile Exchange. Futures reached $107.87, the most since Aug. 2. The volume of all futures traded was 7.2 percent above the 100-day average.Brent oil for September settlement, which expires today, rose 97 cents, or 0.9 percent, to $111.17 a barrel on the London-based ICE Futures Europe exchange. The contract touched $111.53, the highest intraday price since April 2. The more-active October contract was up 81 cents at $109.63. Trading was 6.9 percent higher than the 100-day average.
Gold Demand Fell 12% to Four-Year Low in Quarter on ETP Selling
Gold demand fell 12 percent to a four-year low in the second quarter as record exchange-traded product sales and less central bank buying countered surging jewelry, bar and coin purchases.
Global demand slipped to 856.3 metric tons in the quarter, from 974.6 tons a year earlier, the London-based industry group said today in a report. Consumer demand in India, the biggest buyer, jumped 71 percent and China, the second-largest, gained 87 percent, helping to push global bar and coin purchases to a record and jewelry usage to the most since 2008.
