Currency

Crude 

 Oil prices rose initially after the U.S. Federal Reserve decided to stick to its loose monetary policy and the European Central Bank (ECB) cut interest rates by 25 bps. Supply concerns from the Middle East and positive data on German industrial orders pushed up prices further during the first half of the month. However, higher Chinese inflation numbers, which limited the scope of further growth-spurring measures, hit oil prices later. Significant fall in demand from China and subdued Chinese PMI data also weighed on prices. Prices were further impacted after the U.S. Energy Information Administration trimmed its oil consumption forecasts for 2013 and 2014.

Gold

 Gold remained firm initially after the ECB cut interest rate to an all-time low of 0.5%, which raised the inflation-hedge appeal of the metal. Lower Chinese factory data, fall in new export orders and weak U.S. data also supported gold prices. However, as the month progressed, prices started falling following due to outflow from top gold Exchange Traded Fund, SPDR Gold Trust. Improvement in equity and jobs markets dented the metal’s appeal as an alternative investment avenue. Minutes from the Federal Open Market Committee meeting, this suggested that the Federal Reserve should start scaling down its bond-buying program, also triggered the fall.

INR

 The Central Bank’s hawkish statement at its annual monetary policy review and dollar demand from custodian banks, oil and gold importers weakened the rupee. However, the restrictions on gold imports helped check the downside. As the month progressed, losses in the rupee widened due to rally of the dollar globally. The rupee hit a 11-month low after the Central Bank Governor’s comments on high inflation and concerns over Current Account Deficit dented hopes of rate cut in the upcoming monetary policy. The rupee closed at 56.50 per dollar, down 5.01% on a month-on-month basis.

Euro

 The euro fell against the dollar during the month. Initially, the euro came under pressure after the European Central Bank reduced its main rate and kept open the scope for further rate cuts. The currency fell due to shrinking private sector activity, retail sales and contraction in Gross Domestic Product of the Euro zone. Fall in German retail sales and record high Euro zone unemployment rate further hit the currency. Better-than-expected improvement in the manufacturing and services sectors and positive confidence data of the Euro zone partially capped the losses.