Rupiah, Rupee Lead Weekly Drop in Asian Currencies on Rising Oil

By Lilian Karunungan - Jun 20, 2014

Indonesia’s rupiah and the Indian rupee led declines among Asian currencies this week on concern the two nations’ trade deficits will widen after violence in Iraq caused a spike in global oil prices.
Brent crude reached a nine-month high of $115.71 per barrel on June 19 as militants closed in on Baghdad, capital of the Organization of Petroleum Exporting Countries’ second-largest producer. The Bloomberg-JPMorgan Asia Dollar Index recorded its first weekly drop this month and Vietnam’s dong weakened after the central bank devalued the currency for the first time in a year to boost exports.
“The situation in Iraq is of concern,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “Emerging-market currencies, especially those with problematic external balances and a reliance on imported oil, are vulnerable.”
The rupiah slid 1.5 percent this week to 11,972 per dollar in Jakarta yesterday and the rupee fell 0.7 percent to 60.1875, prices from local banks compiled by Bloomberg show. The Chinese yuan declined 0.3 percent to 6.2260, Thailand’s baht dropped 0.2 percent to 32.452 and the dong weakened 0.4 percent to 21,310. The Asia Dollar Index, which tracks the region’s most-traded currencies excluding the yen, lost 0.3 percent to 115.72.

Fed Dovish

The rupiah touched 12,027 per dollar on June 18, the weakest level since Feb. 13. Indonesia, a former OPEC member, is unlikely to become a net oil exporter again, leaving policy makers to grapple with a long-term revenue shortfall as production shrinks, Finance Minister Chatib Basri said in a June 18 interview. Fuel imports made up 23 percent of the country’s overseas purchases in April.
The rupee declined for a fourth week, its longest losing streak since April. India’s trade shortfall reached a 10-month high of $11.2 billion in May and wholesale-price inflation accelerated to this year’s fastest pace at 6.01 percent, reports showed this month.
Federal Reserve Chair Janet Yellen brushed aside concerns about quickening inflation, saying on June 18 that U.S. borrowing costs are likely to stay low “for a considerable time” after the end of the central bank’s bond purchases.
The Fed’s pledge will keep some Asian currencies supported as funds flow into emerging markets, according to Sook Mei Leong, the Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in Singapore.
“Some Asian currencies continue to hold up very well,” she said. The Fed is still dovish, which is positive for risk-taking, Leong said.
Elsewhere in Asia, Taiwan’s dollar and the Philippine peso were little changed this week at NT$30.065 and 43.790, respectively. Malaysia’s ringgit fell 0.2 percent to 3.2235 and South Korea’s won slipped 0.3 percent to 1,020.61.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Jim McDonald

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India’s Sensex Gains With Rupee as Capital Goods Shares Climb

By Rajhkumar K Shaaw - Jun 19, 2014

Indian stocks advanced as the rupee strengthened the most in a month after the U.S. Federal Reserve said interest rates will remain low as growth rebounds.
Infosys Ltd. (INFO), the second-largest software maker, rose to a two-month high. Power-equipment maker Bharat Heavy Electricals Ltd. (BHEL) climbed for a third day this week. The currency gained 0.8 percent to 59.9437 per dollar, the most since May 16.
The S&P BSE Sensex (SENSEX) added 0.2 percent to 25,296.43 at 10:05 a.m. in Mumbai. The Fed said it expects borrowing costs to stay low for a “considerable time” after the end of its stimulus program, which has fueled equity gains in emerging markets. The Sensex has increased 20 percent this year, the most among BRIC markets, as foreigners bought $9.9 billion of local shares, the highest inflows among eight Asian markets tracked by Bloomberg.
“The liquidity onslaught will continue,” Kenneth Andrade, head of investments at IDFC Asset Management Co., which has $6.9 billion in assets, said in an interview with Bloomberg TV India today. “India will get a disproportionate amount of flows given the current environment.”
The Sensex slid 1.1 percent and yesterday and the rupee weakened to a seven-week low on concern India’s trade balance will deteriorate and inflation will quicken as violence in Iraq boosts oil prices. The nation imports about 80 percent of its fuel requirements.
The gauge trades at 15.6 times projected 12-month profits, near the most expensive level since April 2011. The MSCI Emerging Markets Index is valued at a multiple of 11.
To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India Rate Swaps Rise to a Two-Week High on Inflation Concern

By Shikhar Balwani - Jun 18, 2014

India’s one-year interest-rate swaps rose to a two-week high on concern below-normal rainfall and a decline in the rupee will fuel inflation, reducing scope for monetary easing.
The monsoon, which accounts for more than 70 percent of the nation’s annual rainfall, has been 49 percent lower than the 50-year average since June 1, according to a report on the weather department’s website yesterday. The rupee dropped for a third day in four, adding to concern that a spike in crude oil prices as a result of the Iraq conflict will spur inflation in India, which imports about 80 percent of its fuel.
“While India’s new government seems committed to contain inflation, the monsoon and the Iraq situation are things beyond its control,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi. “Bond markets are a bit edgy. We don’t see the Reserve Bank of India cutting rates any time in 2014.”
One-year swaps, derivative contracts used to guard against swings in funding costs, increased four basis points to 8.33 percent as of 10:10 a.m. in Mumbai, data compiled by Bloomberg show. That’s the highest level since June 2. The yield on the 8.83 percent government bonds due November 2023 rose three basis points, or 0.03 percentage point, to 8.63 percent, prices from the RBI’s trading system show.
The RBI and the government have to be vigilant on inflation, Governor Raghuram Rajan said in Mumbai yesterday. He’s raised the benchmark repurchase rate by 75 basis points since taking charge in September to rein in prices and left the rate unchanged at 8 percent for a second straight meeting on June 3.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Amit Prakash

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India’s Nifty Futures Drop After Indexes Decline on Inflation

By Santanu Chakraborty - Jun 16, 2014

Indian stock-index futures fell after benchmark indexes capped the first two-day loss in more than two weeks.
SGX CNX Nifty Index futures for June delivery fell 0.2 percent to 7,545.5 at 10:06 a.m. in Singapore. The underlying CNX Nifty Index lost 0.1 percent to 7,533.55 yesterday. The S&P BSE Sensex (SENSEX) slid 0.2 percent. The Bank of New York Mellon India ADR Index of U.S.-traded shares dropped 0.4 percent.
The Sensex fell yesterday after data showed wholesale inflation quickened in May at the fastest pace in five months amid a jump in oil prices and forecasts for weaker-than-average monsoon rains, threatening Prime Minister Narendra Modi’s efforts to boost economic growth.
“The inflation figure is particularly worrying due to the fact that the monsoon rains this year are expected to be lower than average, and that the escalating tensions in Iraq could send crude oil prices soaring,” Raghu Kumar, co-founder of RKSV Ltd., wrote in an e-mail.
India’s wholesale-price inflation accelerated to 6.01% in May, the fastest pace since December. India’s consumer-price gains rose to a three-month high of 8.59 percent in April, the most among 18 Asian economies tracked by Bloomberg. Risks to the Reserve Bank of India’s forecast of 8 percent retail inflation by January 2015 “remain broadly balanced,” the central bank said on June 3.

Monsoon Concern

India’s monsoon, the main source of irrigation for the country’s 263 million farmers, was 49 percent lower than the 50-year average since June 1, the India Meteorological Department said yesterday. Weaker rainfall may curb farm output and boost food prices, hampering attempts to rein in Asia’s fastest consumer inflation.
Oil climbed to a nine-month high last week as escalating violence in Iraq fanned concern that supplies from OPEC’s second-largest producer may be disrupted. India imports almost 80 percent of the oil it uses.
The Sensex trades at 15.5 times projected 12-month profits, the most expensive in more than three years. The MSCI Emerging Markets Index is valued at a multiple of 11.
Overseas investors bought a net $420 million of Indian shares on June 12, taking this year’s inflows to $9.7 billion, the most among eight Asian markets tracked by Bloomberg.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Matthew Oakley, Phani Varahabhotla

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.

India’s Sensex Drop for Second Day as Industrials Retreat on Oil

By Santanu Chakraborty - Jun 16, 2014

India’s benchmark stock index fell for a second day on concern a surge in global oil prices will increase inflation and limit the central bank’s scope to lower borrowing costs.
Engineering company Larsen & Toubro Ltd. (LT) dropped the most in two months, sending a gauge of capital goods producers to a two-week low. Coal India Ltd. (COAL), the world’s biggest producer of the fuel, headed for its biggest four-day loss in five months. The rupee weakened beyond 60 per dollar for the first time in more than a month.
The S&P BSE Sensex (SENSEX) lost 0.2 percent to 25,177.7 at 10:53 a.m. in Mumbai. Higher energy costs may add to price pressures in a nation that buys about 80 percent of its oil from abroad, undermining Prime Minister Narendra Modi’s efforts to restrict inflation and revive growth from near a decade-low. Data due today will show wholesale prices climbed 5.34 percent in May, following a 5.2 percent gain in April, according to the median forecast in a Bloomberg survey of analysts.
“Inflation may spike due to oil, which will put pressure on interest rate-sensitive and cyclical stocks,” Alex Mathews, head of research at Geojit BNP Paribas Financial Services (GBNP), said by telephone from Kerala. “The market is likely to consolidate this week as investors wait for cues from the federal budget and watch the progress of the monsoon.”
Oil traded in New York climbed for a fourth day and Brent crude rose on concern that mounting violence in Iraq threatens to disrupt supplies. The spike comes amid forecast by India’s weather office that monsoon rains from June to September may be below normal this season, threatening Modi’s plans to narrow the nation’s fiscal deficit as the government prepares to unveil its first budget next month.
The Reserve Bank of India signaled this month it could ease monetary policy if inflation slows faster than anticipated.
The Sensex trades at 15.5 times projected 12-month profits, near the most expensive level in three years, and compares with the MSCI Emerging Markets Index’s multiple of 11.
Foreigners have bought a net $9.7 billion of local shares this year, the most among eight Asian markets tracked by Bloomberg, on optimism the new government will boost efforts to revive economic growth.
To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net
To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Ravil Shirodkar

®2014 BLOOMBERG L.P. ALL RIGHTS RESERVED.