TODAY FOREX REPORT FOR 25 JULY 2014

MARKET HEADLINES
 

Rupee up 6 paise against US dollar in trade
Extending gains for the third straight day, the rupee strengthened by six paise to 60.03 against the US dollar in early trade today at the Interbank Foreign Exchange market on increased selling of the American currency by exporters. The local currency had gained 15 paise to close at over one-week high of 60.09 per dollar yesterday following bullish local equities and sustained capital inflows. Forex dealers said besides capital inflows, selling of the US currency also supported the rupee but a lower opening in the domestic equity market and dollar's strength against other currencies overseas capped the gains. Meanwhile, the benchmark BSE Sensex fell by 25.91 points, or 0.10 per cent, to 26,121.42 in early trade today.

China's yuan climbs to over three-month high as economy picksup
China's yuan raced to its highest in more than three months on Thursday after solid manufacturing activity confirmed the government's stimulus measures were filtering through the economy and brightening growth prospects in the near term. China's factory activity expanded at its fastest pace in 18 months in July as new orders surged, a preliminary HSBC survey showed, the latest indication that the economy is picking up steam after second quarter GDP numbers last week indicated the economy may
have turned a corner. Spot yuan was changing hands at 6.1914 per dollar in morning trade, up 0.1 per cent from Wednesday's close of 6.1983 and hitting its highest level since April 9, according to Thomson Reuters data. Set against the backdrop of a broadly cautious Asian currency bloc this week, the yuan's rise signals markets are expecting a better performance from the Chinese currency in the coming months compared with earlier this year. The yuan has lost 2.3 per cent against the dollar since the start of the year, the worst performing currency among its emerging market peers. The pick-up in some high frequency data such as private manufacturing surveys and trade have prompted some economists to revise their full-year growth numbers for China. Bank of America Merrill Lynch became the latest to jump the bandwagon with its economists raising full-year growth targets to 7.4 per cent from 7.2 per cent previously on expectations that "Beijing will most likely maintain the intensity of its ongoing mini-stimulus program in the second half." Helping the yuan has been the steadily rising trend in the interbank markets, which are boosting carry-trade strategies. The benchmark seven-day repo rate has risen to 4.3 per cent on Thursday compared with 3.7 per cent last Friday. Higher rates have also enhanced the appeal of the offshore yuan traded in Hong Kong where the currency is also trading at an April high.

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