Rupee opened lower, Dollar lower vs. major currencies

Monday,   23-May-2022   09:55 AM (IST)

The Indian rupee opened the day lower at 77.70/71 levels compared to its previous close at 77.5475/5575 levels as a cut in excise duty on fuel to rein in inflation prompts economists to raise India’s fiscal deficit projections. FM Nirmala Sitharaman announced a cut of Rs.8 per liter on the excise duty on petrol and Rs.6 per liter for diesel to help quell inflationary pressures. It will have a revenue implication of around one trillion rupees per year, she added. The decision to slash the excise duty comes on the back of data that showed that consumer prices in India jumped 7.8% last month, the highest in eight years. India's sovereign bond yields jump in early session, as government’s excise duty cut has raised fears of fiscal slippage and additional borrowing to meet revenue loss. The benchmark BSE Sensex and the broader NSE index are trading higher tracking similar move in Asian peers and U.S. equity futures. At 9:28 AM, the S&P BSE Sensex was trading at 54,406 up 80 point, while the broader Nifty50 was at 16,261 down 5 point. As per the technical indicators range for the USDINR pair may be 77.40-77.90 levels. Rupee has an immediate support at 77.75 levels. A breach of the same may see rupee at 77.85 followed by 77.98 levels. On the positive side rupee is likely to face resistance at 77.56 levels and if it is able to break the same then it may gain up to 77.47 levels followed by 77.35 levels.

The dollar began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising U.S. rates and turned hopeful that loosening lockdowns in China can help global growth. U.S stock market futures bounced sharply in early Asia trade and pulled the risk-sensitive Australian and New Zealand dollars along for the ride. Shanghai is edging out of lockdown and an unexpectedly big rate cut in China last week has been taken a signal that authorities are going to provide support to a recovery. Geopolitics are in focus in Asia this week as U.S. President Joe Biden tours the region, promoting greater U.S. economic engagement and seeking to push back against China’s influence. He meets Japan’s Emperor on Monday ahead of talks with Prime Minister Fumio Kishida. Australia elected a new government on Saturday, though the market reaction was muted as polls had predicted victory for the centre-left Labor Party and it is not expected to shift the direction or pace of interest rate rises. The Reserve Bank of New Zealand is expected to lift its benchmark cash rate by 50 basis points on Wednesday. U.S. Federal Reserve meeting minutes are also due on Wednesday.