Informist, Friday, Dec 17, 2021
By Arushi Jain
MUMBAI – The rupee recovered losses and ended flat against the dollar today because the US dollar weakened globally after the Bank of England and the European Central Bank announced monetary policy tightening on Thursday, earlier than markets had expected, said dealers.
Today, the Indian rupee closed at 76.0850 a dollar, flat against its level at 1530 IST on Thursday. The local unit had earlier fallen to the day’s low of 76.2400 a dollar.
While the BoE surprised markets by becoming the first major central bank to raise interest rates since the COVID-19 pandemic broke out, the European Central Bank cut its bond purchases but vowed to continue its unprecedented monetary policy support for the eurozone into 2022 in its policy outcome.
The BoE raised interest rates to 0.25% from 0.1% for the first time in more than three years in response to calls for tackling a surge in prices, said dealers. This followed data this week which showed that inflation in the UK climbed to its highest in 10 years and amid a rapid spread of the Omicron variant of COVID-19 in the region.
On Wednesday, the US Federal Reserve said it would accelerate tapering of its bond-buying stimulus to end the programme in March 2022, with the aim to combat high inflation.
At 1630 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 96.05 compared with 96.04 on Thursday. It was at 96.51 on Wednesday.
The dollar index fell to as much as 95.88 earlier today.
Earlier today, the Bank of Japan announced plans to scale back its emergency economic support programme and taper its corporate debt purchases to pre-pandemic levels, following other big central banks in phasing out crisis-era policies. However, it made no changes to its ultra-loose monetary policy, and extended financial relief for smaller firms.
During the day, the rupee found support as some foreign banks stepped in to sell the dollar for overseas investments into Indian companies raising funds through various means, dealers said.
The rupee rose to the day’s high of 76.0575 a dollar today.
On the flip side, sentiment for the rupee weakened as domestic equity indices fell sharply, said dealers. The Nifty 50 and the Sensex ended nearly 1.5% lower each.
FORWARDS
The premium on the dollar/rupee forwards contract ended a tad lower today due to dollar sales by foreign banks for forward delivery on behalf of exporters, dealers said.
On an annualised basis, the premium on the one-year, exact-period dollar/rupee contract was at 4.58%, flat against Thursday. The premium was at 348.10 paise compared with 348.67 paise on Thursday.
OUTLOOK
On Monday, the rupee may take opening cues from overnight movement in the dollar index and prices of Brent crude oil, dealers said.
Dealers have now pegged key technical support for the rupee at 76.35 a dollar.
On Monday, the rupee is seen at 75.9000-76.4000 a dollar.
India Rupee – World FX: Sterling, euro steady post BoE, ECB policy
NEW DELHI – The pound sterling was largely steady against the dollar in European trade today after rallying on Thursday after Bank of England’s monetary policy decision.
The BoE surprised most market participants by becoming the first major central bank to hike interest rates since the beginning of the COVID-19 pandemic.
The BoE raised interest rates to 0.25% from 0.1% for the first time in more than three years as inflation in the UK climbed at its fastest pace in a decade, and because of the rapid spread of the Omicron variant of COVID-19 in the region.
The euro was also largely steady against the greenback after rising on Thursday as the European Central Bank decided to slow down its bond purchases but vowed to continue its unprecedented monetary policy support for the eurozone into 2022 in its policy outcome.
Meanwhile, the Japanese yen rose against the dollar after the Bank of Japan in its policy outcome today dialled back emergency pandemic-funding but maintained its ultra-loose policy, as expected by market participants.
The dollar edged lower in European trade because the BoE and ECB adopted more hawkish stances than markets had expected.
At 1515 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.98 compared with 96.04 on Thursday. It was at 96.51 on Wednesday. (Pratiksha)
India Rupee – Asia FX: Most units down tracking local equity markets
MUMBAI – Most Asian currencies were down in early trade today tracking the fall in local equity markets as several developed economy central banks moved to tighten their monetary policy to combat inflation.
The US Federal Reserve on Wednesday decided to double the pace of its asset tapering programme to $30 bln a month.
On Thursday, the Bank of England surprised most market participants to become the first major central bank to raise interest rates since the start of the COVID-19 pandemic, increasing rates to 0.25% from 0.1%.
The divergence in monetary policy action by developed economies and emerging markets weighed on demand for riskier assets.
Central banks in Indonesia and the Philippines held their key interest rates steady to help entrench economic recoveries that are picking up pace as Southeast Asia’s worst COVID outbreaks recede.
Bangko Sentral ng Pilipinas left the benchmark rate at 2% on Thursday. Minutes later, Bank Indonesia held its key rate at 3.50% and pledged to keep it there until it sees signs that inflation is picking up. (Richard Fargose)
India Rupee: Falls on a slump in local equities, BoE hawkish stance
MUMBAI – The rupee fell against the US dollar today as domestic and Asian equity indices were lower tracking an overnight fall in US indices led by losses in technology stocks, said dealers.
At 1032 IST, the Nifty 50 and the Sensex were nearly 1% lower each.
Sentiment for the rupee also weakened after the Bank of England on Thursday surprised market participants by becoming the first major central bank to raise interest rates since the start of the COVID-19 pandemic, which dented sentiment for riskier assets, said dealers.
The European Central Bank also cut its bond purchases but vowed to continue its unprecedented monetary policy support for the eurozone into 2022 in its policy outcome on Thursday.
“The Indian rupee is likely to trade lower like most emerging market currencies as equities face the heat of the hawkish decisions taken by the major central bankers this week,” said a dealer with a brokerage firm. “The foreign investors who have been net sellers in recent weeks wouldn’t be looking to switch sides for now.”
Investors now await the Bank of Japan’s monetary policy decision due later today but do not expect any substantial changes in the policy outcome, according to dealers.
Meanwhile, the dollar index weakened against other major currencies. At 1032 IST, the dollar index, which measures the strength of the US currency against a basket of six major currencies, was at 95.97 compared with 96.04 on Thursday. It was at 96.51 on Wednesday.
The rupee is seen moving in a range of 76.1000-76.4000 a dollar during the day. (Arushi Jain)
India Rupee: Expected range for rupee – Dec 17
NEW DELHI – The following are the expected support and resistance levels for the rupee, as forecasted by leading banks and brokerages in an Informist poll:
(Pratiksha)
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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Source: Cogencis
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