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Rupee ended lower, Euro rose vs. Dollar

Wednesday,   09-Jan-2019   05:28 PM (IST)

The Indian rupee ended the session lower at 70.46/47 levels compared to its opening at 70.05/06 levels after touching the low of 70.6375/6475 levels underperforming most Asian currencies as continuous uptick in crude oil prices renewed concerns of foreign fund outflows amid expectation of wider current account deficit. Rupee opened higher as optimism over the U.S.-China trade deal lifted other Asian currencies. However, the rupee then fell to the day’s low of 70.6375/6475 levels despite greenback sales by state-run banks and private lender, likely on the instructions of the Reserve Bank of India at several intervals. Indian shares finished higher for the fourth consecutive session, as risk appetite improved on hopes of a positive outcome from the U.S.-China trade talks, while domestic investors remained optimistic about a strong results season. The benchmark BSE Sensex closed the session 0.64 percent higher at 36,212.91, while the broader NSE Nifty ended up 0.49 percent at 10,855.15. Indian government bonds ended lower tracking depreciation in the local currency and consistent rise in crude oil prices. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.08%, 3.96% and 4.02% respectively.

The euro and commodity-linked currencies rose on Wednesday as optimism over U.S.-China trade negotiations improved investor sentiment and encouraged some selling of the dollar. Expectations of more easing in China also supported markets, with Asian shares rallying and European stocks rising at the open. News that Beijing and Washington had agreed to extend trade talks in Beijing for an unscheduled third day on Wednesday boosted oil prices, with U.S. West Texas Intermediate crude oil futures topping $50 a barrel for the first time this year. That, in turn, helped spur demand for riskier assets and commodity-linked currencies. An unexpected fall in German industrial output for the third straight month had weighed on the euro on Tuesday. The drop underscored concern about a slowdown and the European Central Bank’s caution as it tries to wean the region off stimulus. The rally in riskier assets has accelerated since last Friday when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year. That eased concern the Fed would be raising rates as the U.S. economy weakened.