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Rupee ended higher, Dollar lower vs. major currencies

Thursday,   11-Oct-2018   05:32 PM (IST)

The Indian rupee ended the session higher at 74.12/13 levels compared to its opening at 74.30/31 levels after touching the high of 74.01/02 levels as an official indicated the government can take more steps to halt the local currency’s slump and limit the country’s widening current account deficit, if needed. It fell to a lifetime low of 74.4850/4950  levels intraday but managed a sharp recovery after an official said the weakening rupee and current account gap are major worries for the government and all options are on the table to manage the unit. Indian shares plunged more than 2 pct today at their lowest closing levels since April, mirroring the markets rout across the globe amid rising trade concerns and expectation of rate hikes in the United States. The benchmark BSE Sensex closed down 2.19 percent at 34,001.15. The broader NSE Nifty ended 2.16 percent lower at 10,234.65. Indian government bonds rose for a second day, as a fall in crude oil prices eased inflation concerns, while the central bank’s open market purchase of notes also aided demand. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.58%, 4.49% and 4.36% respectively.

The dollar weakened on Thursday following an overnight drop in U.S. Treasury yields, though moves in foreign exchange markets were far more contained than the global rout in stocks. Risk appetite broadly remained robust in currencies, with the Aussie and the kiwi rallying by half a percent each against the greenback. Against a basket of its rivals the dollar fell a quarter of a percent to 95.17. It has fallen 1 percent in the last two trading sessions and is holding at its lowest level since the start of October. With long dollar positions at their biggest since end-2016 among hedge funds, markets have become very focused on any slight tweak in likely policy settings from the U.S. Federal Reserve and any data that might change the central bank’s thinking .U.S. inflation data for September is due later in the day with market expectations at 0.2 percent on a monthly basis. As investors selectively took shelter in safe-haven assets, the MSCI index of global stocks hit its lowest levels since early February while gauges of market volatility jumped. Yields on 10-year U.S. Treasury debt ticked six basis points lower to 3.16 percent though similar gauges in currency markets such as the Japanese yen and the Swiss franc were broadly steady. The Swedish crown rallied 1 percent against the euro after robust house price and general inflation data. The euro edged a fifth of a percent higher to $1.1541 on broad dollar weakness, though widening yield spreads between Italian and safe-haven German debt capped gains.