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Rupee opened higher, Dollar eased vs. major currencies

Thursday,   11-Jul-2019   09:05 AM (IST)

The Indian rupee opened the day higher at 68.30/31 levels compared to its previous close at 68.5650/5750 levels as dollar tumbles after comments from Fed Chairman Jerome Powell signal rate cut imminent amid trade tensions and concerns over the strength of the global economy. Indian government bonds gain in early trade tracking local currency but Brent crude oil rising most in six months caps gains in bond prices. Benchmark indices opened gap-up. At 9:27 AM, the S&P BSE Sensex was trading at 38,655, up 98 point, while the broader Nifty50 was at 11,535, up 36 point. As per the technical indicators range for the USDINR pair may be 68.00-68.55 levels. Rupee has an immediate support at 68.42 levels. A breach of the same may see rupee at 68.53 followed by 68.62 levels. On the positive side rupee is likely to face resistance at 68.28 levels and if it is able to break the same then it may gain up to 68.15 levels followed by 67.98 levels.

The dollar eased on Thursday after Federal Reserve Chairman Jerome Powell set the stage for a rate cut later this month, vowing to “act as appropriate” to ensure the world’s biggest economy will be able to sustain a decade-long expansion. In testimony to Congress, Powell pointed to “broad” global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China and other nations. Adding to a generally dovish tone in his testimony, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut. The euro rose 0.2% in Asia to $1.1274, extending gains after a 0.4% rise the previous day. The dollar dipped 0.5% to 107.96 yen, extending its slide from a six-week high of 108.99 set on Wednesday before Powell's testimony. The dollar’s index slipped 0.2% to 96.877, extending its losses into a second session after Powell’s first day of testimony, and turned negative on the week. Money market futures have jumped to price in around a 30% chance that the Fed will cut rates by 50 basis points at its next policy review on July 30-31 - a scenario that had been priced out after Friday’s strong U.S. jobs data. A 25-basis-point cut is already fully factored in. Elsewhere, the British pound also bounced off from six-month lows to trade at $1.2529. But it is still down on the week as the British currency has been dogged by Britain’s economic gloom and a fast-approaching Brexit deadline. A raft of dismal UK data and the risk of crashing out of the European Union without agreeing transitional trade arrangements have forced the Bank of England to change its upbeat assessment of the economy. In contrast, the Canadian dollar moved closer to last week’s eight-month high, as the Bank of Canada showed no sign that it would match potential interest rate cuts from the Fed, making clear it had no intention of easing monetary policy.