Rupee ended steady, Dollar lower vs. major currencies

Friday,   21-Jul-2017   05:31 PM (IST)

The Indian rupee ended the session steady at 64.3150/3250 levels compared to its opening at 64.38/39 levels after touching the high of 64.3025/3125 levels as the dollar remained under pressure against major currencies amid subdued U.S. inflation and as foreign investors poured funds into domestic assets. However, persistent dollar purchases by state-run banks, likely on behalf of the central bank, limited the rupee’s gains. Rupee remained in the narrow range of 64.3025-64.39 levels today. Indian shares rose on Friday to post a third consecutive weekly gain, with Reliance Industries Ltd hitting its highest in over 9-1/2 years after posting strong quarterly results and announcing the launch of a low-cost, 4G-enabled phone. The broader NSE Nifty closed up 0.42 percent at 9,915.25, while the benchmark BSE Sensex finished 0.39 percent higher at 32,028.89. Indian sovereign bond yields fell for the second week, as continued optimism that the country’s Monetary Policy Committee may cut rates next month outweighed impact from open market sale of bonds. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.58%, 4.60% and 4.61% respectively.

The dollar headed for weekly losses on Friday, wallowing at its lowest levels against the euro in nearly two years after what markets perceived as hawkish talk from European Central Bank chief Mario Draghi. But the Australian dollar skidded against the greenback after contrastingly dovish comments from a Reserve Bank of Australia official. The euro caught its breath and steadied at $1.1626 after climbing as high as $1.1659 on Thursday, its loftiest level since August 2015. Draghi said that no exact date had been set for discussing any changes to the ECB's ultra-easy monetary program but did say policymakers would revisit the topic in the autumn. His comments were perceived as "hawkish, even though the ECB didn't tip its hand as to when it will begin balance sheet normalization and in fact left the door open to additional easing if needed," said Bill Northey, chief investment officer at U.S. Bank Private Client Group in Helena, Montana. The dollar's losses against the yen were mitigated by market expectations that the Bank of Japan will keep its massive stimulus program in place far longer than other major central banks amid stubbornly weak inflation. On Thursday, the BOJ kept monetary policy steady as expected and postponed the timeframe to achieve its ambitious inflation target for a sixth time, though it slightly raised its economic growth forecasts. Concerns over low inflation will likely keep the Federal Reserve from raising U.S. rates at its policy meeting next week, analysts said. Fed Chair Janet Yellen signaled caution in her congressional testimony last week, with disappointing U.S. inflation and retail sales data a week ago adding to evidence that the central bank has reason to take its time in tightening even as it has vowed to do so.