Asian currencies are trading mixed

INR appreciated supported by RBI intervention. It is trading weaker today; Fed survey: Higher rates likely for a longer period, Bob stocks graph

Jahnavi Prabhakar,

Economist,

Bank of Baroda

Mumbai, 23 October, 2023:  Fed survey on financial stability highlighted the following concerns amongst the respondents: likelihood of higher rates for a longer period on account of inflation and probability of losses in commercial real estate market. Additionally, there were also concerns around economic weakness in China. Separately, US budget deficit widened to US$ 1.7tn for the fiscal year (ending on 30 Sep 2023), up from 23.2% compared with last year. The shortfall will add to the growing US debt. On the domestic front, RBI’s minutes noted that MPC members remain vigilant on maintaining price stability and focussing on the mandate of medium-term goal of 4% inflation mark.

Global stocks

•  Global stocks ended lower as investors continue to monitor geo-political developments and comments by Fed Chair which signalled a possible hold, even as rate hike remains on the table. Amongst other indices, S&P 500 and FTSE declined the most followed by losses in Dow Jones. Sensex too followed suit, led by sharp fall in consumer durable and oil & gas stocks. It is trading further lower today, in line with other Asian markets.

Global currencies

• Global currencies ended mixed against the dollar. DXY fell by 0.1% as investors assessed comments from Fed Chair. GBP appreciated by 0.2% even as UK’s retail sales fell more than expected. JPY inched closer to the key 150/$ mark. INR appreciated supported by RBI intervention. It is trading weaker today, while other Asian currencies are trading mixed.

 Except Japan (flat), other major global bond yields edged lower. Investors monitored comments from Fed Chair on future rate path and developments in the Middle-East. US 10Y yield fell the most by 8bps but was still ~30bps higher than last week. India’s 10Y yield fell by 1bps supported by better than expected prices in the weekly auction. It is trading a tad higher at 7.37% today.