Rupee ended sharply higher, Pound rose vs. Dollar

Tuesday,   18-Dec-2018   05:32 PM (IST)

The Indian rupee ended the session sharply higher at 70.44/45 levels compared to its opening at 71.33/34 levels after touching the high of 70.42/43 levels as crude oil prices slumped to a 14-month low, while the greenback slipped ahead of the Federal Reserve’s policy meet that starts today. Rupee traded in the range of 70.42-71.35 levels today. Decline in dollar index on expectations of a dovish outlook by the Fed for rate hikes next year kept investors selling the dollar and increased appetite for local bonds, further supporting the currency. Most Asian currencies also ended higher against the greenback. Crude oil prices slipped further today, amid worries over supply. The benchmark Brent crude oil was trading 2.6% lower at $58.12, after dropping as much as to $57.20, its lowest since October 2017. Meanwhile, India will soon open channels to fully pay Iran in rupees for crude purchased after October as both the countries continue talks on how to channel New Delhi’s oil dues to Teheran’s need for the rupee, a senior official at the ministry of petroleum and natural gas said. The comments come after India and Iran inked a pact in November agreeing on full rupee payments for the Persian crude as fresh U.S. sanctions against Iran came into force. Indian shares reversed early losses to end higher to, buoyed by gains in financials and oil marketing companies after benchmark crude prices hit a 14-month low. The broader NSE Nifty ended 0.19 percent higher at 10,908.7, closing above 10,900 for the first time since Oct. 1. The benchmark BSE Sensex closed up 0.21 percent at 36,347.08. Indian government bonds rose for the first time in three sessions, with the 10-year benchmark note ending at an over eight-month high, boosted by strength in the local currency and as a plunge in crude oil prices improved the inflation outlook. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.13%, 3.80% and 3.94% respectively.

The British pound rose further away from 20-month lows on Tuesday, helped by a weaker dollar and confirmation Prime Minister Theresa May will seek parliamentary approval for her much-criticised Brexit deal in mid-January.  May faces an uphill battle in convincing her lawmakers to back her deal - she postponed a previous planned vote in parliament after allies warned her she faced a rout. But the prime minister pledged on Monday to get assurances from the European Union before mid-January to try and break a deadlock over Britain’s fraught efforts to quit the bloc. Analysts at MUFG note that reports stating that the EU will not seek a “managed no-deal” should prove a positive for May as it supports her warnings to lawmakers to back her deal or face economic chaos if Britain crashes out of the bloc in March. Most currency analysts think sterling will fall further if May loses that vote, given less than three months would remain until Britain is scheduled to exit the European Union. But there are growing hopes of a second referendum or even a delay to Brexit should May’s deal prove an impossible sell to parliament. On Tuesday, the pound edged up 0.3 percent to $1.2649 after earlier hitting as high as $1.2661. The pound hit 20-month lows of $1.2477 last week but has been supported since May survived an attempt by colleagues to oust her from her job. Sterling traded at 89.91 pence per euro, flat on the day. The pound has remained in a tight range against the euro, despite severe price swings, as traders await more clarity on where Britain and the EU will stand after March. Traders are reluctant to bid up the pound too much given the threat of a no-deal Brexit that most economists agree would severely damage Britain’s international competitiveness. The leader of Britain’s opposition Labour Party sought to turn up the pressure on May by lodging a motion of no confidence in the prime minister. But the vote is non-binding.