Rupee ended lower, Dollar and Yen gains

Thursday,   06-Dec-2018   05:24 PM (IST)

The Indian rupee ended the session lower at 70.90/91 levels compared to its opening at 70.79/80 levels after touching the low of 71.14/15 levels in line with regional currencies amid global risk aversion and caution ahead of Organization of Petroleum Exporting Countries’ decision on crude oil output cut. Still, the rupee ended off lows as Brent crude oil price slipped below $60 per barrel, after Saudi Arabia energy minister said an output cut of one million barrel per day would be enough, according to Reuters. Rupee touched the high of 70.76/77 levels today as banks stepped up greenback sales likely for exporters. Concerns over domestic growth also came to the forefront, after Fitch Ratings today lowered India’s economic growth forecast for the current fiscal year by 60 basis points to 7.2%, from 7.8% predicted earlier. The global rating agency expects growth to further fall to 7% in 2019-2020. Indian shares ended lower today, marking their worst closing levels in two weeks, dragged down by index heavyweights such as Reliance Industries Ltd and Infosys Ltd. The broader NSE Nifty closed 1.69 percent lower at 10,601.15, while the benchmark BSE Sensex was down 1.59 percent at 35,312.13. Indian government bonds rose for a third day, as crude oil prices fell on bets the Organization of Petroleum Exporting Countries may cut oil supply less than expected, while sentiment remained upbeat after a dovish commentary from the Monetary Policy Committee yesterday. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.92%, 3.90% and 4.02% respectively. Investors remained focus on the conclusion of two-day meeting between the OPEC and its allies that started today in Vienna and will conclude tomorrow.

The dollar and the yen rose on Thursday after the arrest in Canada of a top executive of Chinese tech giant Huawei prompted fears of a flare-up in U.S.-China trade tensions. The dollar has been under pressure over concern about a possible U.S. recession. But the arrest of Huawei Technologies Co Ltd’s chief financial officer increased safe-haven demand for the currency as doubts emerged over a truce on trade struck days ago between Presidents Donald Trump and Xi Jinping. As investors grew cautious and pulled back from riskier assets the Japanese yen, often sought in times of market unrest, rose 0.4 percent. Sharp losses in technology shares pulled down benchmark stock indexes in China as the Chinese yuan slid 0.7 percent against the dollar to 6.9037, its biggest daily fall since August. The Australian dollar also fell more than one percent, demonstrating its vulnerability to a worsening trade conflict due to its export-oriented economy. Against a basket of six rivals, the dollar edged up 0.2 percent to 97.202. The currency has fallen 0.4 percent this week but is only half a percent off a 17-month peak of 97.693 touched on Nov. 12. The dollar fell broadly earlier this week after a thaw in trade tensions between Washington and Beijing. It has also been pressured by worrisome signs in U.S. bond markets about economic growth and signals from the Federal Reserve that a slowdown in the pace of interest rate hikes may be coming. Fed policymakers are still widely expected to raise interest rates again at their Dec 18-19 meeting, but the market focus is on how many rate hikes will follow in 2019.