Rupee ended lower, Pound lower vs. Dollar

Wednesday,   22-Sep-2021   04:03 PM (IST)

The Indian rupee ended the session lower at 73.87/88 levels compared to its opening at 73.7050/7150 levels tracking losses in regional currencies amid expectations that the Federal Reserve will provide more hints about scaling back its asset purchases later today. The rupee slipped to a near one-month low of 73.9350/9450 levels in the session on foreign banks’ dollar purchases, but pared some losses on exporter covering. Rupee traded in the range of 73.6550-73.9350 levels.  Most Asian currencies extended yesterday’s losses, and were down between 0.1% to 0.3%. The risk for Asian currencies and equities is that the persistent threat of inflation may prompt some Fed officials to pull forward their interest rate forecasts, similar to the June policy review. Indian federal government bond yields settled marginally higher ahead of the U.S. central bank’s policy decision due later today. The BSE Sensex settled the day at 58,927, down 78 points. Meanwhile, the 50-pack Nifty closed 15 points lower at 17,547. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.63%, 3.59% and 3.84% respectively. 

Sterling fell to a one-month low on Wednesday as investors pushed back expectations of a rate hike by the Bank of England after a flurry of weak data. In early London trade, the British currency eased to $1.3628, with more losses expected after it dropped below a low of $1.364 hit on Monday, according to analysts. Even a subdued greenback and improving risk sentiment after debt-laden China Evergrande calmed nerves by saying it would repay a Yuan-denominated bond on Thursday failed to lift the pound. The focus was squarely on central bank action this week as investors went from expecting hawkish commentary by the BoE to digesting that an interest rate hike was probably more than six-months away after a string of dismal economic data. While money markets expect at least two rate hikes by the end of 2022, some analysts say those expectations may be optimistic. A lot depends on how Britain’s labour market will fare in as the job furlough scheme is about to end this month, with ING analysts expecting a rise in unemployment over the coming weeks. Weak economic output in July and retail sales the following month, along with high inflation, were already weighing on the central bank’s decision making. The pound was also a tad weaker against the euro at 85.90 pence as participants awaited the next big Fed event for hints on its future policy path, including whether it would begin tapering its bond buying by November.