Rupee opened higher, Dollar under pressure vs. major currencies

Tuesday,   18-Dec-2018   09:06 AM (IST)

The Indian rupee opened the day higher at 71.33/34 levels compared to its previous close at 71.5450/5550 levels as disappointing US data prompts dollar decline against major and regional currencies. Indian government bonds higher in early trade as crude oil prices slip and rupee gains after weak U.S. data. Benchmark indices opened lower after a sell-off in US stocks ahead of Federal Open Market Committee (FOMC) meet. At 9:30 AM, the S&P BSE Sensex was trading at 36,105, down 165 points while the broader Nifty50 was ruling at 10,838, down 50 points. As per the technical indicators range for the USDINR pair may be 70.70-71.50 levels. Rupee has an immediate support at 71.51 levels. A breach of the same may see rupee at 71.62 followed by 71.92 levels. On the positive side rupee is likely to face resistance at 71.02 levels and if it is able to break the same then it may gain up to 70.91 levels followed by 70.60 levels.

The dollar remained under pressure on Tuesday as markets counted down to a crucial Federal Reserve meeting amid speculation it will soon hit the pause button to its monetary tightening cycle in the face of rising risks to global growth. A sell-off in equities overnight extended into the Asian morning as investors fretted over a drum roll of weak data globally, reinforcing bets the Fed's widely expected rate hike on Wednesday would usher in a slowdown, or even a pause, to three years steady rate increases. Senior Fed officials, including Fed Chairman Jerome Powell, have recently become more cautious about the policy outlook that underlined a shift in market sentiment from a few months ago on rising signs of cooling in the global economy. While the U.S. central bank's latest median dot plot projections from September indicated its willingness to raise rates three times in 2019, the interest rate futures market is pricing in only one more rate hike for 2019. This mismatch is largely due to the belief that higher U.S. borrowing costs will likely hurt U.S. growth and ultimately force the Fed to pause its monetary tightening path. In a tweet overnight, U.S. President Donald Trump said that it was 'incredible' that the Fed is even considering raising rates given the global economic and political uncertainties. The markets, however, looked past those comments. The yen and the Swiss franc clocked gains of 0.5 percent each overnight and held firm versus the dollar in early Asian trade. In Asia, investors are looking to a major speech by President Xi Jinping on Tuesday to mark the 40th anniversary of China's market reforms. China is also scheduled to hold its annual Central Economic Work Conference this week. Commodity currencies such as the Canadian dollar and Norwegian crown were under pressure as oil prices tumbled overnight on signs of oversupply in the United States and on demand concerns stoked by a slowing global economy.