Money Market Watchlist: Inflation, Factory Output, Central Bankers’ Comments

The Indian rupee gained for a second straight week and ended at a 32-month high of 63.37 against the U.S. dollar on Friday, on the steady unwinding of the American currency by exporters.

A record-setting rally in local equities along with global dollar weakness largely supported the rupee. For the week, the local currency strengthened around 50 paise since the start of 2018. Meanwhile, India's forex reserves surged by $4.5 billion to a new high of $409.4 billion for the week ended Dec. 29.

On the global front, the dollar ended slightly higher against a basket of the other major currencies on Friday after briefly dipping following a weaker-than-expected U.S. nonfarm payrolls report for December. The U.S. dollar index, was up 0.16 percent at 91.75 late Friday.

While, the dollar declined for a third straight week after the data showed that U.S. economy added 148,000 jobs in December, well below the 190,000 forecast by economists, while the unemployment rate held steady at 4.1 percent.

Fed officials have penciled in three rate increases this year and two in 2019. Higher interest rates tend to boost the dollar by making the currency more attractive to yield-seeking investors.

Investors will be turning their attention to domestic and global inflation data along with industrial and production data due this week. It will be an early indicator of consumer spending in the economy. They will also react to comments by a number of Fed speakers for further clues on the timing of the next rate hike.

Ahead of the coming week, following events are likely to affect the currencies markets:

Monday, January 8

• Financial markets in Japan will remain closed for a holiday.

Tuesday, January 9

• Germany is to report on industrial production and the trade balance.
• The euro zone is to report on the unemployment rate.

Wednesday, January 10

• China is to release data on producer and consumer price inflation.
• The UK is to report on manufacturing production and the trade balance.
• The U.S. is to report on import prices and crude oil inventories data.

Thursday, January 11

• The European Central Bank is to publish the minutes of its December policy meeting.
• The U.S. is to publish data on producer price inflation and initial jobless claims.
• New York Fed President Bill Dudley is to deliver remarks at an event in New York.

Friday, January 12

• China is to report on the trade balance.
• India is to release monthly industrial and manufacturing production data and consumer price inflation along with weekly foreign exchange reserves.
• The U.S. is to round up the week with what will be closely watched data on consumer inflation and retail sales.

Quick Check

• The won slid 0.4 percent, reversing earlier gains, to 1,066.78 per dollar. South Korea will take steps "sternly" in case of one-sided moves in the won, said an official at the nation's FX authority, who asked not to be identified because of internal policy.
• The yen slipped 0.1 percent to 113.18 per dollar.
• The Bloomberg Dollar Spot Index was flat after four weeks of losses.
• The kiwi rose 0.1 percent to 71.79 U.S. cents.
• The euro climbed less than 0.1 percent to $1.2033.
• The pound was flat at $1.3568.

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