Broker's Notes: Indian rupee strengthens

Indian Rupee

The Indian rupee strengthened to its highest level in more than two weeks on Monday, boosted by gains in local shares and other Asian peers following better-than-expected US jobs data on Friday. The index of the dollar against six major currencies was down below 82 mark as an aftermath of the US jobs that came in better than expected on Friday. Indian shares were trading 1.12 percent higher, with Infosys Technologies and ICICI Bank leading the rise, taking cues from strong Asian markets. Foreign funds have bought shares worth a net $13 billion so far in 2010, adding to last year's record $17.5 billion inflows.

US Dollar

The dollar traded weak after firm US payrolls data last week eased market anxiety over chances of a global slowdown and boosted demand for the euro and growth-leveraged currencies. The dollar looked vulnerable against the yen after failing to maintain its gains following Friday's payrolls data, though caution about Japanese intervention deterred further yen buying. US non-farm payrolls fell 54,000, a much smaller drop than the predicted 100,000. Private employment, considered a better gauge of labour market health, increased 67,000. In currency markets, rising risk appetite has tended to help the euro and higher-yielding currencies in recent months, as investors increasingly see the greenback as a funding currency for investments on expectations of a prolonged period of near zero rates in the US.

Gold

Gold inched down on Monday as stock markets firmed on optimism the U.S. economy would not fall back into recession, while a slight drop in ETF holdings put additional pressure. Bullion was likely to trade in a tight $10 range, with U.S. investors away for the Labor Day holiday, while silver backtracked after rallying to its strongest since March 2008 on Friday as investors booked profits and ETF holdings dropped. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust said its holdings slipped to 1,294.442 tonnes by Sept 3 from 1,294.908 tonnes on Sept 2. The holdings surged to a record 1,320.436 tonnes on June 29. The world's largest silver-backed exchange-traded fund, the iShares Silver Trust said its holdings dropped to 9,276.73 tonnes by Sept. 3 from 9,280.40 tonnes on Sept. 1.

US markets closed today

Monday is a holiday in the US and Canada. The currency market will still be open for trading but the equity and bond markets will be closed for Labor Day. With no major economic data scheduled for release from any country, it should be a relatively quiet trading session. The only piece of US data worth watching this week is the trade balance from US. Rest of the week is likely to be pretty dull on the economic data front.

Euro

The euro continued to spike higher against the US dollar following another round of relatively positive economic data. Although the pace of Eurozone retail sales growth fell short of expectations by rising only 0.1 percent in July, an upward revision to the prior month’s report (from 0 to 0.2 percent) offset this month’s softer release. A pickup in service sector activity in France and Italy also led to an upward revision to the Eurozone PMI services report. More gains were added after the US data revealed that Fed’s immediate concerns of a possible double dip could be deferred as things stand economically.

Oil

Oil fell for a second day on speculation fuel demand will decline as the U.S. summer peak consumption season ends and amid doubts about the pace of the global economic expansion. Data from the US Commodity Futures Trading Commission reveal that hedge fund managers and other large speculators decreased their net-long position in New York crude-oil futures in the week ended Aug 31. Speculative long positions, or bets prices will raise, outnumbered short positions by 13,120 contracts on the New York Mercantile Exchange. Net-long positions fell by 14,203 contracts, or 52 percent, from a week earlier.

Source: Richcomm Global, Dubai; www.richcommglobal.com