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Rupee ended higher, Euro lower vs. Dollar

Thursday,   07-Feb-2019   05:28 PM (IST)

The Indian rupee recouped early losses and ended the session higher at 71.45/46 levels compared to its opening at 71.7275/7375 levels after touching the high of 71.30/31 levels after the nation’s rate-setting panel unexpectedly cut its key policy interest rate that lifted local assets, while announcing steps to boost dollar inflows. Rupee opened at 71.7275/7375 levels and traded in 71.54-71.76 range before the policy announcement. It fell to 71.72 post the policy, but rebounded to the day’s high of 71.30/31 levels later in the session. Most Asian currencies ended little changed to lower after returning from holiday. Financial markets in China are closed for rest of this week for Lunar New Year. The Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) in its sixth bi-monthly monetary policy meeting cut the repo rate to 6.25%t from 6.50%, earlier. The Committee also changed its stance to 'neutral' from the 'calibrated tightening' adopted in October meet last year. The MPC unanimously voted to change the stance to neutral. The reverse repo rate stands at 6 per cent. Indian shares ended little changed as they came off early highs. The benchmark BSE Sensex closed down 0.01 percent at 36,971.09, its first fall in six sessions, while the broader NSE Nifty continued its advance into a sixth session, ending 0.06 percent higher at 11,069.4. Indian government bonds rose for a third day, after the rate-setting panel unexpectedly cut rates and shifted its focus to growth, paving way for more easing. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.98%, 4.19% and 4.06% respectively.

The euro slid to a new two-week low against the dollar in early trading in Europe Thursday as traders braced for more gloomy headlines about the economic outlook. German industrial output data have already set the tone, showing a drop of 0.4% in December rather than the 0.7% rise predicted. Spain meanwhile reported output fell 6.2% year-on-year in December, far worse than forecasts for a 2.3% decline. The contrast with the U.S. was underlined Wednesday by comments from Federal Reserve Chairman Jerome Powell, who said the economy was in a 'good place' with solid growth and low unemployment. The main focus in Europe Thursday will be the EU Commission’s new economic forecasts, which are expected to be revised down sharply, especially as regards Italy. That’s important because the uneasy peace agreed between the EU and the Italian government over the latter’s budget was based on some optimistic forecasts about growth this year. A lower growth forecast will mean harsher scrutiny of the populist coalition’s budget plans. Elsewhere, the British pound fell below $1.2900 for the first time in over two weeks on the rising risk of a ‘no-deal Brexit’. EU Council President Donald Tusk sparked controversy Wednesday by saying there was “a special place in hell” for those who announced Brexit “without even a sketch of a plan” for delivering it. The comments have inflamed sentiment in the U.K. and have hardened opposition to the withdrawal agreement negotiated by the EU and the government of Prime Minister Theresa May. Elsewhere Thursday, the Bank of England is expected to again vote unanimously to keep its key interest rate unchanged when its Monetary Policy Committee meets. The decision and accompanying statement are due at 07:00 AM ET (12:00 GMT).