Rupee ended lower, Pound gains vs. Dollar

Tuesday,   21-Jan-2020   05:22 PM (IST)

The Indian rupee ended the session lower at 71.20/21 levels compared to its opening at 71.18/19 levels after touching the low of 71.2350/2450 levels as regional risk appetite remained weak amid fears about the spread of a new coronavirus from China. Rupee traded in the range of 71.1375-71.2350 levels today. The International Monetary Fund late yesterday cut India’s 2020 growth forecast to 5.8% from 7% previously. The lower-than-expected growth figure from India along with the drag from other emerging markets prompted the IMF to cut its global growth forecast for the current year to 3.3% from 3.4% previously. Asian currencies ended lower against the dollar, with the offshore Chinese Yuan depreciating more than 0.5%, as regional markets were rattled by the news of the spread of a pneumonia-like virus in China. The S&P BSE Sensex erased 205.10 points, or 0.49 per cent, to settle at 41,323.81 levels. The Nifty50 slipped below the psychological level of 12,200 to end at 12,169.90 levels, down 54.70 points or 0.45 per cent. Indian government bonds gained for the first time in three sessions, ahead of the central bank’s so-called special open market operation, due later this week. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.69%, 3.97% and 4.05% respectively.

Sterling gained on Tuesday after the British economy created jobs at its strongest rate in nearly a year in the three months to November, potentially undermining the case for a Bank of England interest rate cut next week. The pound rose as much as 0.3% to $1.3050, up from around $1.3010 before the data was released. Against the euro, sterling also added 0.3% to 85.04 pence. Money market expectations for a 25 basis point rate cut fell slightly around 62%, from around two-thirds earlier in the day. Tuesday’s reading showed the number of people in employment rose by 208,000 to 32.90 million, the biggest increase since the three months to January 2019 and much stronger than the median forecast in a Reuters poll for a rise of 110,000. Excluding bonuses, which smooth out some volatility, the data also showed that pay growth slowed a touch to 3.4% annually in November, the slowest since the three months to April 2019. Three BoE policymakers have recently said that more stimulus might be needed including a cut to rates to boost a flagging economy, although many analysts say policymakers could hold off if data shows an economic rebound in December following the general election. Purchasing Managers Index surveys on Friday will provide a clue as to whether that rebound occurred.