Rupee ended sharply higher, Dollar lower vs. major currencies

Thursday,   02-Jul-2020   02:42 PM (IST)

The Indian rupee ended the session sharply higher at 75.01/02 levels compared to its opening at 75.4950/5050 levels after touching the high of 75.00/01 levels on foreign banks’ dollar sales, likely related to investment flows, which led to culling of dollar long positions. The rupee strengthened aggressively in the latter half of today’s session, backed by corporate dollar inflows from Reliance’s digital unit Jio Platforms' stake sale. Traders also anticipated flows from Axis Bank to hit the market, after the private lender’s board today approved a $1.99 billion capital raising plan. The heavy dollar sales triggered dollar-long stop losses on the pair (USD/INR) and the Reserve Bank of India not intervening led to a sharp appreciation in the local unit, traders said. Asian equities and currencies were buoyed by the upbeat data, and largely shrugged off worries over the increasing trend in new cases of the coronavirus in the United States. India's federal government bond yields ended little changed after a sharp fall yesterday, as traders shift focus towards tomorrow’s debt supply, after successful completion of the central bank's special open market operation. The Indian benchmark indices rose nearly two per cent on Thursday, lifted by gains in auto and IT stocks. At 2:28 pm, the S&P BSE Sensex was trading at 35,976, up 561 point, while the broader Nifty50 was at 10,586 up 156 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.37%, 3.52% and 3.68% respectively.
    
The U.S. dollar slipped to a one-week low against its rivals on Thursday as upbeat U.S. and European economic data sharpened risk appetite, with hopes for a COVID-19 vaccine breakthrough also helping sentiment. Against a basket of currencies, the greenback is on track for its biggest weekly drop in a month, of 0.4%. However, it could swing in either direction depending on U.S. jobs data due at 1230 GMT. Non-farm payrolls figures are expected to show an increase of 3 million jobs last month. But estimates vary widely amid concerns about whether the U.S. economy can sustain its recovery as coronavirus infections surge and some states reimpose limits on business and personal activity. Despite the dollar’s recent spell of weakness, the greenback is still up 2.5% from the 2020 low of 94.6 it hit in early March. A Reuters poll predicts more weakness for the greenback over the next 12 months due to weak global demand. Supporting sentiment in the meantime was news that a COVID-19 vaccine developed by German biotech firm BioNTech and U.S. pharmaceutical giant Pfizer had shown potential in early-stage human trials. U.S. manufacturing activity also rebounded more than expected in June, with the Institute for Supply Management’s manufacturing activity index hitting its highest in 14 months. Similar surveys from China, Germany and France all pointed to an improvement in factory activity.