Rupee opened higher, Dollar defensive vs. major currencies

Thursday,   14-Dec-2017   09:09 AM (IST)

The Indian rupee opened the day higher at 64.35/36 levels compared to its previous close at 64.4325/4425 levels tracking broad dollar decline after Fed maintains forecast for rate hikes in 2018. The July-September current account deficit (CAD) widened to 1.2 percent of gross domestic product, or $7.2 billion. That was wider than the 0.6 percent or $3.5 billion in the same period a year ago. Indian government bonds gain tracking rise in U.S. Treasury prices, after Fed policy decision along expected lines, while fall in crude oil prices also helping sentiment. As per the technical indicators range for the USDINR pair may be 64.10-64.60 levels. Rupee has an immediate support at 64.45 levels. A breach of the same may see rupee at 64.56 followed by 64.65 levels. On the positive side rupee is likely to face resistance at 64.21 levels and if it is able to break the same then it may gain up to 64.10 levels followed by 63.99 levels.

The dollar remained on the defensive on Thursday, having tumbled after the Federal Reserve raised interest rates as expected, but left its rate outlook for the coming years unchanged. There was limited reaction among major currencies after China raised interest rates marginally, in the wake of the Fed’s move. The Fed raised key short-term rates by a quarter point to a range of 1.25-1.50 percent on Wednesday. The Fed projected three more hikes in both 2018 and 2019, unchanged from the last round of forecasts in September. Traders and analysts said the dollar came under pressure after the Fed’s policy announcement as the U.S. central bank kept its interest rate projections steady rather than revising them higher. The dollar was also weighed down after U.S. core consumer price data released on Wednesday showed slowing inflation, raising concerns the Fed will be less able to execute multiple rate increases next year. Congressional Republicans reached a deal on final tax legislation on Wednesday, clearing the way for final votes next week on a package that would slash the U.S. corporate tax rate to 21 percent and cut taxes for wealthy Americans. Hours after the Fed’s rate hike, China’s central bank on Thursday raised interest rates for its reverse repos and medium-term lending facility (MLF) loans by 5 basis points. The BoE is widely expected to keep interest rates on hold at 0.5 percent on Thursday, after raising rates for the first time since 2007 last month. The ECB is seen likely to keep interest rates steady and reaffirm its existing monetary policy stance, after having decided in October to halve bond buys to 30 billion euros a month from January.