Rupee opened lower, Dollar higher vs. Euro

Thursday,   14-Feb-2019   09:09 AM (IST)

The Indian rupee opened the day lower at 70.87/88 levels compared to its previous close at 70.7950/8050 levels after dollar index climbs to near two-month highs amid higher-than-expected US core inflation. Indian government bonds ease in early trade as investors book profits after yesterday’s rally and as crude oil prices continue to gain. Benchmark indices opened on a flat note on Thursday taking cues from Asian markets that traded cautiously amid ongoing US-China trade talks. At 9:47 AM, the S&P BSE Sensex was trading at 35,974, down 60 points, while the broader Nifty50 was ruling at 10,769, down 25 points. As per the technical indicators range for the USDINR pair may be 70.50-71.20 levels. Rupee has an immediate support at 71.06 levels. A breach of the same may see rupee at 71.18 followed by 71.40 levels. On the positive side rupee is likely to face resistance at 70.85 levels and if it is able to break the same then it may gain up to 70.60 levels followed by 70.40 levels.

The dollar held near 3-month highs against the euro on Thursday, benefiting from sustained strength in core U.S. inflation and weak data out of Europe. Although headline U.S. inflation growth logged its weakest pace in 1-1/2-years in January, traders focused on the core price gauge, which was up for the third straight month and gave the dollar some impetus. The greenback was hit earlier this year from a shift to a cautious stance by the Federal Reserve. The latest data suggested the central bank will need to stay vigilant on pricing pressures even as it adjusts policy imperatives in the face of heightened risks to growth. The dollar index, a gauge of its value versus six major peers, was marginally higher at 97.20, having gained 0.5 percent in the previous session. The index has rallied 1.7 percent so far this month, after two consecutive months of losses. That contrasted with the wobbles in the euro. The single currency, which has around a 58 percent weighting in the dollar index, has tumbled 1.63 percent this month on the back of weaker-than-expected economic data out of the euro zone and expectations the European Central Bank will remain highly accommodative this year. Political uncertainty in Spain, the common area's fourth largest economy, has further hampered the euro. Spain's parliament rejected a draft 2019 budget on Wednesday after Catalan separatists turned their back on the government, pushing the country close to an early national election amid an increasingly fragmented political landscape. Broad risk appetite in financial markets has been on the uptick in the past couple of days on rising expectations of a breakthrough in the trade impasse between United States and China. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are in Beijing for high level talks. U.S. President Donald Trump said on Wednesday the talks with China were "going along very well" as they try to resolve the tariff dispute ahead of a March 1 deadline. Elsewhere, the yen was steady at 110.95. The dollar has gained on its Japanese rival in recent weeks, up 1.9 percent so far in February. Analysts believe that Japanese demand for foreign bonds is one factor leading to weakness in the yen. The New Zealand dollar remained well bid, up 0.15 percent at $0.6805, having rallied hard the previous day after the nation's central bank adopted a less dovish line on policy than many of its global counterparts. The Aussie dollar, often considered a barometer for global risk appetite, was flat at $0.7087, after gaining around 0.5 percent in the previous session led by optimism on the China-U.S. trade talks.