Economy

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

BENGALURU (Reuters) – The outlook for the Indian rupee has barely changed from last month as the Reserve Bank of India’s interventions keep the currency, deemed expensive compared with its peers, in a tight range, according to a Reuters poll of foreign exchange analysts.A sharp fall in global equities related to sudden liquidation of carry trades, where investors borrow in cheap currencies to invest in higher yielding assets elsewhere, pushed the rupee to an all-time low of 83.96 per dollar on Tuesday. The RBI’s likely intervention in the FX market limited the currency’s fall to 0.25%.That trend was unlikely to change anytime soon as analysts in an Aug. 1-6 poll have barely changed their forecasts from a poll in July.Median forecasts showed the rupee will trade at 83.55/$ and 83.40/$ by the end of October and end of January, respectively, from about 83.95/$ on Tuesday. It was forecast to gain about 1% to 83.00/$ in a year.Fiona Lim, senior FX strategist at Maybank, said the rupee/dollar was a rather tricky pair to predict. “This is likely due in part to RBI’s penchant to lean against the wind to reduce volatility.””The main risk that threatens our forecasts (is) … if there is too much scrutiny, possibly by the U.S. Treasury on the rupee (being) kept artificially weak. While that’s not likely, a combination of higher-for-longer inflation and poorer (economic) growth outcomes for India could also threaten our outlook,” Lim said.The rupee’s trade-weighted real effective exchange rate (REER) was 106.54 in June, according to the RBI’s monthly bulletin, suggesting the currency is overvalued by more than 6%.The partially-convertible currency has been the most expensive relative to its trading peers since December 2017.”Domestic policy focus is to boost manufacturing and exports, for which one of the things that we may require is a slightly cheaper currency, but current account deficit trends have favoured a less undervalued currency,” said Dhiraj Nim, a FX strategist at ANZ.”It is now in an overvaluation zone so the effect of policy intervention is to prevent further overvaluation of the currency now. As long as the RBI is keen on building up those reserves and occasionally utilising them to smoothen out the volatility, this process might very well continue.”(For other stories from the August Reuters foreign exchange poll click here) More

TOKYO (Reuters) – Japan said on Wednesday that it conducted a record single-day yen-buying intervention in April, selling 5.92 trillion yen ($40.83 billion) worth of dollars in a fight against a falling yen at that time.Quarterly data from the Ministry of Finance (MOF) showed that Japan spent a record 5.92 trillion yen on a single-day yen-buying intervention on April 29 and a further 3.87 trillion yen on May 1.The previous single-day record for such intervention was 5.62 trillion yen spent on Oct. 21, 2022, according to MOF data available since 1991.The latest data represent a detailed daily breakdown of the previously revealed 9.79 trillion yen intervention made during the period from April 26 through May 29.The two rounds of massive dollar-selling intervention helped push up the yen by 5% from a 34-year low of 160.245 per dollar, but failed to reverse the yen’s longer-term weakness.The yen resumed its downturn and slid to a 38-year low of 161.76 per dollar in July, prompting Tokyo to intervene again and spend another 5.53 trillion yen to support its currency.Later in July, the yen staged a sharp rally as traders aggressively unwound carry trades after a slew of economic data raised the prospect of a U.S. economic downturn and bigger rate cuts from the Federal Reserve.Separate data from the finance ministry on Wednesday showed that Japan’s foreign reserves fell to $1.22 trillion at the end of July, down $12.4 billion from a month earlier, largely due to a drop in foreign securities holdings.The decline in reserves reflect the sale of its U.S. Treasury holdings to finance the dollar-selling, yen-buying intervention, analysts said.Japanese authorities would not reveal the make-up of the country’s foreign reserves, but most of the foreign securities holdings are believed by economists to be in U.S. Treasuries.($1 = 144.9800 yen) More

TOKYO (Reuters) – A prime potential candidate for Japan’s next prime minister endorsed the Bank of Japan’s policy of gradually raising interest rates, saying its normalisation of monetary policy could push down prices and boost industrial competitiveness.”The Bank of Japan (BOJ) is on the right policy track to gradually align with a world with positive interest rates,” ruling party heavyweight Shigeru Ishiba told Reuters in an interview.”The negative aspects of rate hikes, such as a stock market rout, have been the focus right now, but we must recognise their merits, as higher interest rates can lower costs of imports and make industry more competitive,” he said.Japan’s ruling Liberal Democratic Party (LDP) is set to hold a leadership election in September.Ishiba, a four-time candidate for the party’s president, has yet to officially announce his intention to run in the latest race, but regularly ranks high in voter surveys on future prime ministers.He made the remarks after the BOJ’s decision last week to raise interest rates and its readiness for further hikes roiled financial markets.Japan’s Nikkei stock average on Monday plunged in the worst sell-off since October 1987 on the prospect of higher rates and U.S. recession fears but recouped most of the loss on Tuesday.”Japan’s economy is largely driven by domestic demand,” with exports accounting for just a fifth of its gross domestic product, Ishiba said.”Even though some export-oriented companies are benefiting from the weak yen, there is no doubt a majority of people are more affected by higher prices stemming from the weak currency.”Ishiba said the general consensus on the ideal range for the yen is 110-140 per dollar, but he declined to comment on his own views on desirable currency levels. The yen traded around 144 to the dollar early Wednesday.He also noted that higher interest rates would help market mechanisms work properly in the economy by promoting a shift of capital to companies with strong growth and boosting Japan’s industrial competitiveness as a result.Ishiba has long been a critic of former BOJ governor Haruhiko Kuroda’s radical monetary stimulus, which was part of former premier Shinzo Abe’s “Abenomics” policies to prop up growth.The BOJ should explain to the public the merits of higher interest rates, Ishiba said, as Japan convenes a special parliament session later this month to discuss the latest market rout, where BOJ Governor Kazuo Ueda is likely to attend.It will take time for benefits to materialise, he said. “There will be a time lag, for example, for the yen to start firming and import prices to go down.”He declined to comment how far the BOJ should raise rates, stressing that politics should not weigh into the central bank’s monetary policy. More

LONDON (Reuters) – Britain needs to spend an extra 50 billion pounds ($64 billion) a year on public investment to boost productivity and long-run growth, largely funded by public borrowing, the National Institute of Economic and Social Research said on Wednesday.NIESR forecasts Britain’s economy will only grow by 1.1% this year and does not expect annual growth to exceed 1.3% in between now and 2029 – well short of a 2.5% goal suggested by Prime Minister Keir Starmer in the election campaign which took Labour to power at last month’s election.Asked if Labour had a chance of meeting this goal, NIESR Deputy Director Stephen Millard said no.Labour finance minister Rachel Reeves has set a more formal target of achieving the fastest growth in economic output per head among the Group of Seven advanced economies for two consecutive years. Millard said this looked slightly more achievable.”We have some catching up to do with other G7 countries, so there is some room for us to grow faster. Do we have the capacity to do it? That’s the $64 million question,” he said.In a quarterly report on Britain’s economy, NIESR, one of Britain’s leading economic think tanks, said public investment needed to be doubled to 5% of national income to fund transport, housing, education and skills and boost productivity.Growth in output per head in Britain has lagged behind other advanced economies since the 2008-09 financial crisis.To support this increased investment – which would be well above that in most other rich countries – the government should no longer include borrowing to fund investment in its self-imposed fiscal rule, NIESR said.That sits at odds with Reeves’ public focus on fiscal prudence.In a statement last week to parliament, Reeves said the former Conservative government had left the economy in a far worse state than she expected and she scrapped some smaller investment projects – a move Millard called “quite concerning”.However, NIESR Director Jagjit Chadha did query whether the British state had the capacity to spend extra investment wisely.”Reluctantly I think we probably do not. And so we stick to the fiscal rules … pat ourselves on the back for being careful guardians of the public purse and continue to fail in addressing our deep set and persistent failures,” he wrote.($1 = 0.7870 pounds) More

(Reuters) -Rivian on Tuesday stuck to its forecast that production would not rise this year and said deliveries in the third quarter would be slightly lower, as the EV maker races to rebuild inventory after a factory shutdown in April designed to cut costs.Shares of the company, which also said it would halt production for over a month next year as it prepares to launch a smaller vehicle in 2026, fell nearly 6% in volatile trading after the bell. Rivian (NASDAQ:RIVN), which makes the R1S SUV and R1T pickups, is seen as one of the few electric vehicle makers with potential to navigate a sharp slowdown in EV demand. But a drastic reduction in cost and the rollout of its more affordable SUV are seen crucial to its success.With the three-week factory retooling, Rivian introduced a new generation of its R1 vehicles with advanced features and a simpler manufacturing process and introduced offers on leases to boost sales of the older-generation vehicles. While that helped Rivian beat second-quarter revenue estimates, the company is now dealing with a depleted inventory base and expecting a slight fall in deliveries in the current quarter, CEO RJ Scaringe told Reuters.Rivian has largely built its dual motor vehicles and was ramping up production of other variations for customers who want vehicles delivered immediately, he said. Cost reduction from the factory retooling will be realized largely in the second half of the year, Scaringe said, reaffirming the company’s target of turning its first profit in the last three months of the year.Tuesday’s results followed Volkswagen (ETR:VOWG_p) Group’s $5 billion investment in Rivian last month as part of a new joint venture to share expertise in EV architecture and software development that will help sustain the U.S. EV maker’s cash balance until it starts selling the R2 SUVs.Rivian still loses thousands of dollars for every vehicle it makes – the company said its loss amounted to 39% of a vehicle’s sales price, greater than the LSEG estimates of 34%.”Gross margins will really take off as they get volume as they are making a lot more money on the R1 platform now, whereas with the first-generation there was no way they were going to get to profitability,” said investor Vitaly Golomb, managing partner at Mavka Capital.Rival Lucid (NASDAQ:LCID) said on Monday its largest shareholder will inject up to $1.5 billion in the maker of Air luxury electric sedans as it looks to roll out its much-awaited seven-seater SUV, the Gravity, later this year. More

Illumina has seen sluggish demand for its tools and services, used to develop therapies and vaccines, from key markets such as China and cautious spending from its customers such as biotechnology companies, amid high interest rates.”Consumable sales remained solid as customers continued to increase their sequencing activity, but instrument demand has softened in a constrained funding environment,” CEO Jacob Thaysen said.The company expects its Core Illumina revenue to decline 2% to 3%, compared to the previous year. Earlier, it had expected full-year revenue from the segment to be flat.On an adjusted basis, it expects a per-share profit of $3.80 to $3.95 for its core segment for 2024. Analysts expect full-year adjusted profit of $3.91 per share for the whole company.Of Illumina’s two reportable segments, Core Illumina and Grail , the latter was spun off on June 24.It decided last December to divest cancer diagnostic tests maker Grail after the companies ran afoul of U.S. and European antitrust enforcers for more than two years and faced fierce opposition from activist investor Carl Icahn.San Diego, California-based Illumina’s quarterly revenue was $1.11 billion in the second quarter, compared to analysts’ estimate of $1.08 billion.On an adjusted basis, it earned 36 cents per share of profit during the quarter ended June 30, while analysts’ on average expected 90 cents per share.The company had flagged that it would take a goodwill impairment charge of $1.47 billion in the second quarter related to the Grail spin-off. More

Discussions focused on policies that could be supported by an IMF program, it said in a statement, such as those which could strengthen public finances, boost bank reserve buffers, improve governance and transparency and mitigate risks from the country’s investment in Bitcoin.The IMF and El Salvador have reached “preliminary understandings” on improving the nation’s primary balance, the IMF said, to around 3.5% of gross domestic product (GDP) over a three-year period.The country also plans to gradually strengthen its reserve buffers by reducing reliance on domestic financing and instead receiving support from the IMF and other development banks, the fund said.On Bitcoin, the IMF said that many potential risks “have not yet materialized,” but that there was a joint recognition that El Salvador needed to enhance transparency and mitigate risks from the project.Salvadoran President Nayib Bukele made bitcoin a legal tender and has touted plans for “Bitcoin City,” a tax-free crypto haven powered by geothermal energy from a volcano. More