Rupee ended lower, Dollar edged higher vs. major currencies

Wednesday,   17-Oct-2018   05:37 PM (IST)

The Indian rupee ended the session at 73.5950/6050 levels compared to its opening at 73.41/42 levels, after touching a low of 73.6650, tracking weakness in local shares and on caution ahead of the release of the U.S. Federal Reserve’s latest policy meeting later today. However, some dollar sales by exporters and an upbeat global risk sentiment limited further losses in the local unit. Indian government bonds fell as investors sold bonds to benefit from the recent rally in prices and ahead of a market holiday tomorrow and fresh supply of notes later this week. Indian shares ended more than one percent lower on Wednesday, dragged by financial stocks such as India bulls Housing Finance Ltd and Yes Bank Ltd amid liquidity concerns. The benchmark BSE Sensex closed 1.09 percent lower at 34,779.58 while the broader NSE Nifty ended 1.24 percent weaker at 10,453.05. Indian markets have been facing a liquidity crunch owing to a depreciating rupee and higher oil prices. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.62%, 4.47% and 4.37% respectively.

The dollar edged higher on Wednesday as a rally on Wall Street boosted risk appetite, although gains were capped before the release of Fed minutes later in the day. Still, moves were muted in currency markets, contrary to the big gains in global stocks and drops in government bond yields in markets such as Italy. Against a basket of its rivals, the dollar rose 0.1 percent to 95.15. It remains about 2 percent below a 2018 peak of near 97 hit in mid-August. Major Wall Street indexes rose by more than 2 percent each as strong earnings indicated the U.S. economy is still expanding, despite rising interest rates and global trade-war tensions. But market analysts warned against buying into the dollar's strength as global financial conditions appeared to be tightening globally. Cross-currency basis swaps in Euros, yen and sterling, money market gauges of offshore dollar liquidity, have widened in recent weeks. That suggest the U.S. Federal Reserve's rate hikes have cut into the availability of overseas dollars. Markets will be looking for clues on the dollar's direction and the path for U.S. interest rates from minutes of the Fed's September meeting, due for release later on Wednesday. Interest rate futures are pricing in a 77 percent likelihood that the Fed will raise rates in December, according to the CME Group's Fed Watch Tool. Two more increases are likely next year. The British pound was down 0.2 percent at $1.3158 after gaining 0.25 percent on Tuesday as a crucial European Union summit got underway.