Rupee ended higher, Pound higher vs. Dollar

Monday,   23-May-2022   04:08 PM (IST)

The Indian rupee erased its losses and ended the session higher at 77.5150/5250 levels compared to its opening at 77.70/71 levels after touching the high of 77.5125/5225 levels following comments from the Reserve Bank of India Governor Shaktikanta Das that the central bank will not allow a runaway depreciation of the rupee at a rapid pace, on the heels of the local unit touching an all-time low last week. The rupee will find its level and the central bank does not have a specific target on exchange rate in mind, Das told CNBC-TV18 new channel. Intervention in the domestic currency market is multi-pronged to minimize the actual outflows of dollars, he added. The Indian authorities' recent steps will have a sobering effect on inflation going ahead, but the central bank still seeks to raise interest rates in the next few monetary policy meetings, Das said. Rupee opened lower at 77.70 as local importers ramped up dollar purchases. Rupee traded in the range of 77.5125-77.70 levels today. Asian currencies were mostly higher, while regional stock markets were mixed. Over the weekend, the government cut the federal excise levy on gasoline by eight rupees per litre and that on diesel by six rupees a litre to cool inflation. Indian government bond yields ended higher, as traders remain worried about the impact of the cut in federal excise duty on fuel on the country's fiscal position, even as government officials expect Government to stick to its fiscal first-half borrowing calendar. Equity markets turned lower in the fag-end of the session, erasing gains and ending flat with a negative bias on Monday amid selling in index heavyweights like Tata Steel, HDFC twins, Reliance Industries, and ITC. The BSE Sensex index ended at 54,289, down 38 points or 0.07 per cent. The NSE Nifty50 closed at 16,215, down 51 points or 0.32 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.48%, 3.52% and 3.61% respectively.

The pound rallied on Monday, persisting at more than two-week highs against a broadly weaker dollar, as traders await key data on the UK’s manufacturing industry this week. Currently, sterling was up against the dollar at $1.2577. The strength of the pound is largely down to broad dollar weakness, as investors sold the U.S. unit on hopes that loosening lockdowns in China could help global growth. Strong labour numbers early last week had reinforced expectations that the BoE will need to continue raising interest rates to fight high inflation. Data on Friday showed British retail sales jumping unexpectedly in April. But expectations were tempered days later when inflation hit a 40-year high, raising concerns over how far the BoE will be able to hike rates without precipitating an economic downturn. The BoE has raised interest rates four times since December - more than any other major central bank. The euro rallied on Monday as investors sold the dollar on hopes that loosening lockdowns in China could help global growth. A calmer mood on equity markets in early European trading also pressured the dollar, which fell sharply last week but has been the go-to currency for investors this year when risk assets tumbled and worries about the economy and inflation jumped. Risk-sensitive currencies rose across the board, with the Australian dollar, which initially showed a muted reaction to the expected victory for the centre-left Labor Party in national elections on the weekend, soaring almost 1%.