DAILY FOREX REPORT FOR 17 JULY 2014

MARKET HEADLINES

Rupee down 15 paise against US dollar in early trade
The rupee depreciated by 15 paise to 60.27 against the US dollar in early trade today at the Interbank Foreign Exchange market due to increased demand for the American currency from importers. Weakness in other currencies against the dollar overseas, after US Fed indicating interest rates could rise earlier than expected as the jobs market picking up, also put pressure on the local unit, forex dealers said. They said, however, a higher opening in the domestic equity market capped the rupee's losses.
The rupee had lost five paise to close at 60.12 against the dollar yesterday following sustained demand from importers. Meanwhile, the benchmark BSE Sensex rose by 149.34 points, or 0.59 per cent, to trade at 25,377.34

Aussie dollar struggles on questions about China; sterling infocus
The Australian and New Zealand dollars fell on Wednesday as Chinese growth data raised some questions about how long the growth would last, with some investors cautious about a recovery without another burst of government stimulus. The U.S. dollar clung to modest gains after the Federal Reserve chief said rates could rise sooner if employment improved. In the European session, focus will be on the British pound which hit near-six-year highs against the dollar on Tuesday after a surprise jump in inflation. Jobs and wages data are due at 0830 GMT and evidence that earnings are picking up will add to the case that the Bank of England needs to raise rates soon. "With unemployment falling, business surveys printing at robust levels and now inflation close to the BoE's target level, any sign of wage growth will effectively put the icing on the cake as far as markets are concerned," said Peter Kinsella, currency strategist at Commerzbank. "The third and fourth quarter will be all about the pound dealing with higher rate expectations." Sterling was flat at $1.7140, having scaled a six-year high of $1.7192 on Tuesday after inflation and house prices data prompted investors to raise bets that the BoE would lift interest rates before the year ends. British inflation surged to a five-month high last month and house prices rose at their fastest pace in years. The Australian dollar lost ground, shedding about 0.2 percent to $0.9350, even though China reported its economy grew slightly faster than expected in the second quarter, helped by government stimulus. China is Australia's largest trading partner, making the Aussie a proxy for China plays. This time, the currency got little help from data. Analysts said that might be
because China's National Bureau of Statistics also said a downturn in the property market could create downward pressure on growth. In New Zealand, the kiwi weakened after a report showed the annual inflation rate reached 1.6 percent in the second quarter versus expectations of 1.8 percent. That was well within the Reserve Bank of New Zealand's (RBNZ) target range.

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