Rupee opened flat, Dollar edges higher vs. major currencies

Wednesday,   27-May-2020   10:30 AM (IST)

The Indian rupee opened the day flat at 75.67/68 levels compared to its previous close at 75.66/67 levels as likely foreign fund inflows offset the impact of a sharp slump in the Chinese Yuan. Indian government bond yields little changed in early session, volume stays thin as markets await central bank’s OMO purchase announcement. Equity markets made cautious gains, with bank stocks being the top contributors. At 10:08 AM, the S&P BSE Sensex was trading at 30,608, down 1 point, while the broader Nifty50 was at 9,042 up 12 point. As per the technical indicators range for the USDINR pair may be 75.50-76.00 levels. Rupee has an immediate support at 75.80 levels. A breach of the same may see rupee at 75.91 followed by 76.10 levels. On the positive side rupee is likely to face resistance at 75.60 levels and if it is able to break the same then it may gain up to 75.48 levels followed by 75.40 levels.

The dollar edged higher on Wednesday as worries about the U.S. response to China’s proposed security law for Hong Kong supported safe-haven demand for the greenback. The euro held gains against the dollar and the pound but faces a severe test when the European Commission is expected to release details of a financial rescue fund for the bloc later on Wednesday. Financial markets have been caught in a tug-of-war between optimism and pessimism about the global outlook. Some investors are betting on a resumption of normal economic activity following the crippling coronavirus pandemic, but others worry the threat of U.S. sanctions against China for its treatment of Hong Kong could easily worsen risk sentiment yet again. The dollar edged up to $1.2321 against the pound on Wednesday in Asia, pulling away from its lowest level in two weeks. The dollar traded at $1.0983 per euro, close to a one-week low. It bought 0.9655 Swiss franc in Asia, nursing a 0.6% loss in the previous session. The Australian dollar fell 0.3% to $0.6636, while the New Zealand dollar fell 0.2% to $0.6185 as worries about U.S.-China tensions hurt demand for riskier assets. The Aussie and the kiwi are often traded as liquid proxies for risk because of their close ties to China’s economy and global commodities. The dollar remained locked in a narrow range against the Japanese currency, trading at 107.51 yen. Many of the places that were hardest hit by the coronavirus pandemic are now allowing more businesses to resume normal operations, causing investors to unwind safe-haven bets and push the dollar lower on Tuesday. However, the move faded on Wednesday as Asian stocks fell and U.S. Treasury yields fell, showing risk aversion remains a factor. U.S. President Donald Trump said on Tuesday the United States will announce before the end of the week its response to China’s planned security bill for the former British colony of Hong Kong. Trump’s administration is considering sanctions on Chinese officials, Bloomberg News reported. The United States and China have repeatedly clashed over trade policy, advanced technology, and China’s response to the coronavirus, which originated in the central province of Hubei late last year. Another row between the world’s two superpowers over civil liberties in Hong Kong could prompt a return to risk-off trades that favour dollar gains, declining equities, and rising bond prices. Further gains in the euro depend on whether policymakers can narrow their differences on how to fund an economic rescue package for the euro zone, traders say. France and Germany have proposed a 500 billion euro coronavirus recovery fund that would issue grants to help the bloc’s economic recovery from the coronavirus pandemic.