Rupee ended higher, Yen lower vs. Dollar

Tuesday,   23-Apr-2024   04:01 PM (IST)

The Indian rupee ended the session higher at 83.3425/3525 levels compared to its opening at 83.36/37 levels after touching the high of 83.2925/3025 levels tracking the rangebound movement in its Asian peers and largely steady U.S. bond yields as traders await fresh cues from economic data due later in the week. Rupee traded in the range of 83.2925-83.39 level today. Rupee rose to a session high of 83.2925 due to dollar sales by foreign banks but it surrendered those gains, pressured by dollar demand from importers. Meanwhile, dollar-rupee forward premiums slipped, with the 1-year implied yield down 1 basis point (bp) at 1.66%, pressured by an uptick in near-maturity U.S. bond yields. Indian government bond yields were down as oil prices seemed to have steadied, boosting investor sentiment. Indian equity markets stayed range-bound giving up most of their gains in the fag-end. The S&P BSE Sensex settled the day at 73,738.45, up 89.83 points or 0.12%, while the Nifty50 closed at 22,368, up 31.60 points or 0.14%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.12%, 1.18% and 1.32% respectively.

The yen hit fresh multi-year lows against the dollar and the euro on Tuesday, keeping investors on heightened intervention watch ahead of the Bank of Japan's meeting this week, while dovish policy maker chatter left sterling around its softest in months. The euro, which climbed broadly after stronger than expected business activity data in France and Germany, reached 165.62 yen, its highest since 2008. The dollar rose to 154.87 yen, its highest since 1990, edging ever closer to 155, a level considered by many participants as the new trigger for intervention by Japanese authorities. Japanese Finance Minister Shunichi Suzuki said last week's meeting with his U.S. and South Korean counterparts has laid the groundwork for Tokyo to act against excessive yen moves, the strongest warning to date on the chance of intervention. However, there are doubts about whether Tokyo will act so close to the BOJ's two-day policy meeting that starts on Thursday. Japan's central bank is expected to project inflation will stay around its 2% target for the next three years in new forecasts due on Friday, signalling its readiness to cautiously raise interest rates again this year from current near-zero levels. The euro gained against more than just the embattled yen, climbing 0.2% on the dollar to $1.06753, having steadied after losses earlier in the month. The common currency gained 0.16% on the pound to 86.39 pence, having briefly matched the previous day's four month high of 86.43 pence, after the German PMI data. Comments from Bank of England policy makers that they see inflation slowing back towards the 2% target, and likely staying there, have seen investors become more confident that Bank of England rate cuts will come in the summer. Earlier in the year, sterling took support from expectations that Bank of England would cut rates meaningfully later than the European Central Bank, which markets currently see moving in June. Meanwhile markets see the U.S. Federal Reserve as being one of the last major central banks to cut, and are currently pricing in a 46% chance of the Fed's first-rate cut starting in September, with November not far behind at 42%, according to the CME FedWatch Tool. That was in sharp contrast to just a few weeks ago when markets were betting on June for the U.S. monetary easing cycle to begin, a shift that has driven the dollar higher around the world. The pound dropped to a five-month low against the dollar of $1.2299 on Monday, though it was last a fraction higher at $1.2360. Investors will have another chance to assess the strength of the U.S. economy this week, with first-quarter gross domestic product data on Thursday and personal consumption price expenditures (PCE) index, the Fed's preferred measure of inflation, on Friday.