Rupee opened higher, Dollar higher vs. major currencies

Thursday,   23-Sep-2021   10:43 AM (IST)

The Indian rupee opened the day higher at 73.78/79 levels compared to its previous close at 73.87/88 levels as buoyant regional shares overshadow hawkish Fed outcome. India’s federal government bond yields largely unchanged in early trade as investors await central bank’s simultaneous purchase and sale of bonds. Indian shares edged up in early trade on Thursday to hover near record highs, led by metal and banking stocks, as investors overlooked signs of a slightly hawkish tilt by the U.S. Federal Reserve overnight. At 10:16 AM, the S&P BSE Sensex was trading at 59,542 up 614 point, while the broader Nifty50 was at 17,729 up 182 point. As per the technical indicators range for the USDINR pair may be 73.60-74.10 levels. Rupee has an immediate support at 73.97 levels. A breach of the same may see rupee at 74.10 followed by 74.26 levels. On the positive side rupee is likely to face resistance at 73.68 levels and if it is able to break the same then it may gain up to 73.52 levels followed by 73.39 levels.

The dollar hit its highest in a month on Thursday and pressed the euro towards major support levels, after the Federal Reserve set the stage for rate hikes next year -- far sooner than its developed market peers are expected to move. The U.S. central bank left policy settings unchanged overnight and, as expected, did not announce the beginning of asset purchase tapering. But the Federal Reserve said “a moderation in the pace of asset purchases may soon be warranted” and Fed Chair Jerome Powell said board members believed tapering could conclude around mid-2022, opening the way for rate hikes after that. The dollar rose broadly after his comments, especially against the euro and yen. The U.S. yield curve flattened and Fed funds futures markets moved to price a 50% chance of a hike in October and to fully price a 25 basis point rate hike in December. At a one-month low of $1.1684 in early Asia trade, the euro is close to its 2021 trough of $1.1664 and not far from major support at $1.1602, a break of which could open the way to falls as far as $1.14. Liquidity was lightened by a holiday in Japan on Thursday. The yen also lost ground after Powell’s news conference and ended up falling 0.5% for the session - its sharpest drop in more than three months - taking it to 109.87 per dollar, about the middle of a range it has kept since March. The dollar index hit a one-month high of 93.526. The Bank of Japan, which met on Wednesday, made no policy changes and is not seen lifting rates anytime soon while the European Central Bank is also lagging the Fed. Fed members’ new projections have hikes starting in 2022. The yen, a safe-haven asset, had also suffered a bit on Wednesday because developer China Evergrande offered the market some relief after its main unit said it agreed to settle a bond interest payment with some domestic creditors. It still has to settle $83.5 million in interest on an offshore bond due on Thursday. The Australian and New Zealand dollars gave up gains after Powell’s remarks and traded slightly lower in Asia, with the Aussie last down 0.1% at $0.7323, while the kiwi dipped below $0.70 to $0.6992. The Bank of England meets on Thursday, with traders expecting it to keep rates steady but wary of any hawkish surprises. Sterling is hovering just above big chart support at $1.3615.