Rupee recouped losses, Pound up vs. Dollar

Friday,   03-Jul-2020   02:47 PM (IST)

The Indian rupee recouped its intraday losses and ended the session at 74.63/64 levels. Rupee opened higher at 74.5950/6050 levels today and dropped to touch the low of 75.0250/0350 levels as persistent dollar purchases by state-run banks, likely on behalf of the central bank, outweighed the impact of speculative and corporate flows. Rupee traded in the range of 74.5950-75.0250 levels today. Investment flows related to Reliance Jio’s stake sale in its digital subsidiary, combined with other dollar inflows, have been supportive of the rupee. Traders also anticipate flows from Axis Bank to hit the market, after the private lender’s board approved a $1.99 billion capital raising plan yesterday. Asian currencies were mixed. India’s crippled services industry, the lifeblood of economic growth and jobs, contracted sharply in June as an extended lockdown imposed to stop the spread of the coronavirus stalled business activity, a private sector survey showed. Although the pace of decline moderated from May - the Nikkei/IHS Markit Services Purchasing Managers’ Index jumped to 33.7 in June from May’s 12.6 - it remained a long way from the 50-mark separating growth from contraction. Indian federal government bond yields stayed higher as traders awaited the result of a weekly debt auction. Benchmark indices climbed off the day's top, dragged down by public sector banks, but were still trading in the green on Friday. At 2:11 pm, the S&P BSE Sensex was trading at 36,033, up 189 point, while the broader Nifty50 was at 10,597 up 45 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.38%, 3.47% and 3.66% respectively.                          

Sterling was headed for its first positive week in four against the dollar on Friday, holding close to the $1.25 mark as a week of negotiations between Britain and the European Union ended on what investors called an optimistic note, with meetings expected to resume next week. Analysts said the pound’s slip in morning trading in London was largely due to some spillover of political uncertainty in Europe, with the resignation of French prime minister Eduoard Philippe fuelling speculation of a cabinet reshuffle. Brexit talks this week between Britain and the EU ended early on Thursday, with a meeting between the chief negotiators on Friday cancelled. The EU’s chief negotiator, Michel Barnier, on Thursday said serious divergences remained between the two sides after talks this week on their future relationship. He also said in a statement that the EU continued to believe that an agreement was possible and in everyone’s interest, but its key demands for an economic partnership were unchanged. Implied volatility on the pound - as shown by options markets - remains elevated as compared to other currencies. Against the euro, it was down 0.06% at 90.16 pence. Sterling has risen 1.2% against the dollar this month, after losing 2.7% in June.