Rupee ended lower, Dollar rose vs. major currencies

Friday,   14-Jun-2019   05:28 PM (IST)

The Indian rupee ended the session lower at 69.80/81 levels compared to its opening at 69.51/52 levels after touching the low of 69.8450/8550 levels on dollar demand from large corporates and foreign banks. Rupee was also dragged down by fears of further surge in crude oil prices and losses in the local shares. Indian shares fell, ending lower for the second straight week, as investors were wary about the country’s plans to impose higher tariffs on some U.S. goods, amid higher food prices in the domestic market. New Delhi was planning to impose the tariffs on over 20 goods imported from the United States. Meanwhile, India’s wholesale food prices index for May rose 5.10% year-over-year, compared to 4.95% in April. The broader NSE Nifty closed down 0.76% at 11,823.30, while the benchmark BSE Sensex ended 0.73% lower at 39,452.07. Indian government bonds ended higher for a fifth consecutive week, despite early losses, as a fall in crude oil prices and core inflation have further strengthened monetary easing bets, while a surprise open market bond purchase announcement also provided support. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.21%, 4.26% and 4.30% respectively. India's foreign exchange reserves rose to $423.55 billion as of June 7, compared with $421.87 billion a week earlier, the Reserve Bank of India said.

The dollar rose on Friday and was set for its biggest weekly gain in three weeks as investors squared up for a U.S. central bank meeting next week where policymakers might signal when it plans to cut interest rates for the first time in a decade. But with bets on U.S. interest rates swinging massively - market expectations are now for three rate cuts until end-2019, versus three hikes foreseen just six months ago - investors are growing cautious that policymaker rhetoric might underwhelm. Markets are pricing in about a 33% probability of a quarter point rate cut next week and as many as 73 basis points in cumulative rate cuts through the end of the year. Against a basket of its rivals, the dollar rose 0.1% to a one-week high of 97.09. Elsewhere, the Australian and New Zealand dollars fell as bets on interest rate cuts undermined demand as a Group of 20 meeting later this month kept investors sidelined. Markets were also raising bets of a rate cut by the Reserve Bank of New Zealand. The weakness in the Australian dollar has pushed investors to unwind some of their carry trades, where speculators borrow in a low-yielding currency such as the Swiss franc and invest in relatively higher-yielding ones such as the Australian dollars. The Australian dollar/Swiss franc cross, a barometer for such speculative bets, has fallen nearly 6% in eight weeks, indicating hedge funds were losing money on such bets.