Rupee ended weaker, Pound lower vs. Dollar

Tuesday,   19-Jun-2018   05:24 PM (IST)

The Indian rupee ended the session weaker at intraday low of 68.38/39 levels compared to its opening at 67.9825/9925 levels in line with Asian peers, as fears of escalation in trade-related tensions between two of the world’s largest economies - U.S. and China - hurt investors’ risk appetite. Intraday, the rupee briefly rose to 67.97/98 levels. However, the pace of depreciation slowed down amid likely sporadic intervention from the central bank across the futures and spot market. Indian shares fell for a second straight session today as fears of a global trade war intensified after U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion worth of Chinese goods. The broader NSE Nifty ended 0.83 percent lower at 10,710.45, while the benchmark BSE Sensex closed 0.74 percent lower at 35,286.74. Indian government bonds rose ahead of the release of minutes of the Monetary Policy Committee’s latest meeting even as global risk sentiment weakened amid escalating trade tussle. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.35%, 4.13% and 4.20% respectively. Prime Minister Narendra Modi’s Bharatiya Janata Party today said it has quit the coalition government in Jammu and Kashmir state which has been seeing worsening in militant violence recently.

Sterling is trading down at around 1.3155 after the UK Prime Minister Theresa May lost a key Brexit legislation voting in the House of Lords ahead of Wednesday’s key voting in House of Commons. The GBP/USD was trading lower after the US President Donald Trump said he will impose another $200 billion on tariffs on imports from China risk-off sentiment to arise. After breaking below 1.3200, GBP/USD is likely to target 1.3100 level as the political uncertainty weighs as the UK Prime Minister Theresa May faces the same Brexit legislation vote in the House of Commons on Wednesday evening while the UK fundamentals still support wait-and-see approach from the Bank of England policymakers that are scheduled to meet later this week. It is widely expected that the Bank of England Monetary Policy Committee (MPC) member will leave the Bank rate unchanged at 0.50% while voting 7-2 in favor of the decision. With inflation stagnant at 2.4% y/y in May and core inflation at 2.1% y/y, it is highly unlikely that dissenters Ian MacCafferty and Michael Saunders will be joined by any other MPC member with market pricing in November as the first real chance for the rate hike. The UK monetary policy stands in contrast to the US Federal Reserve Bank that hiked rated last week saying the inflation and growth picture in the US justify its gradual path of monetary policy normalization.