Rupee ended lower, Pound lower vs. Dollar

Wednesday,   13-Feb-2019   05:21 PM (IST)

The Indian rupee ended the session lower at 70.7950/8050 levels compared to its opening at 70.48/49 levels after touching the low of 70.8550/8650 levels as importers stepped up greenback purchases, while reversal in local shares raised concerns of foreign fund outflows that erased early gains from upbeat risk sentiment and robust local economic data. Rupee traded in the range of 70.40-70.8550 levels today. Most Asian currencies ended higher against the dollar. Indian shares wiped off early gains to end lower in a topsy-turvy trade dragged by oil marketers, a day after the retail inflation came below the Reserve Bank of India’s target for a sixth straight month. The benchmark Sensex closed down for a fifth session, ending 0.33 percent lower at 36,034.11, while the broader Nifty ended 0.35 percent lower at 10,793.65. Indian government bonds rose for the first time in four sessions, with the benchmark paper closing at a one-month high, as bets of another rate cut in the next policy meeting gained strength after retail inflation in January slumped to a 19-month low. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.23%, 4.17% and 4.01% respectively.

Sterling held below the $1.29 line on Wednesday as inflation, which fell to a two-year low in January, failed to shake the currency out of its recent trading ranges with markets firmly focused on the progress of Brexit negotiations. Currency markets have shifted their expectations on Brexit to the end of March which is when Britain is slated to leave the European Union with currency derivatives indicating a pickup in market volatility then. British lawmakers will face a stark choice between Prime Minister Theresa May’s Brexit deal or a long extension to the March 29 deadline for leaving the bloc, the UK’s chief Brexit negotiator was overheard saying in a Brussels bar. The pound was flat at $1.2887, broadly trading in the middle of the range of a pre-Brexit vote referendum high of the $1.5025 to the $1.1483 range. Against the euro, the pound was a shade weaker at 87.87 pence. With six weeks to go before Brexit, markets are increasingly focused on political developments rather than economic data. In a sign of how inured markets have become to Brexit headlines and weak data, implied volatility on the pound or expected swings in the British currency has fallen to more than a three-month low of nearly 10 vol compared to 14 vol in early December. British government bond futures gained modestly after January inflation slowed more than expected, touching a session high of 124.11, 14 ticks up on the day. Ten-year gilt yields dropped 2 basis points on the day to a two-day low of 1.171 percent. Market implied expectations of a quarter percentage point rate hike by the Bank of England have shrunk to 33 percent before the end of the year compared to nearly half last month.