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Rupee opened lower, Yen lower vs. Dollar

Wednesday,   11-Sep-2019   09:02 AM (IST)

The Indian rupee opened the day lower at 71.84/85 levels compared to its previous close at 71.70/71 levels as further rise in Treasury yields weighs on demand for regional currencies. India government bonds lower tracking jump in U.S. Treasury yields as U.S.-China trade tensions ease and as German bond yields rose amid expectations of a fiscal stimulus. Benchmark indices opened flat with a positive bias tracking their Asian peers. At 9:22 AM, the S&P BSE Sensex was trading at 37,230, up 84 point, while the broader Nifty50 was at 11,021, up 18 point. As per the technical indicators range for the USDINR pair may be 71.50-72.10 levels. Rupee has an immediate support at 71.89 levels. A breach of the same may see rupee at 71.98 followed by 72.14 levels. On the positive side rupee is likely to face resistance at 71.74 levels and if it is able to break the same then it may gain up to 71.65 levels followed by 71.45 levels.

Fragile investor confidence supported the dollar and weakened the yen on Wednesday but currency markets kept to tight ranges ahead of series of major central bank meetings over the next week. Investor focus for now is centered on the European Central Bank’s meeting on Thursday, which is expected to push interest rates even further into negative territory. The ECB could set the tone for upcoming rate-setting decisions by the U.S. Federal Reserve and the Bank of Japan next week, and for the broader global risk appetite. For now, a cautious risk-on mood has prevailed after political crises that had hobbled markets, from Britain to Hong Kong, abated, taking the shine off safe-haven assets. Bonds slid overnight and the yen hit 107.65 per dollar, its lowest since Aug. 1. Overhanging the relief buying, however, are signs of a slowdown in global demand, which have offset recent positive developments in U.S.-China trade negotiations. The euro, which has shed 3% since June, was flat at $1.1047. The dollar was flat against the Australian dollar at $0.6860 and steady on the yen and the New Zealand dollar. ECB policymakers are leaning toward a package that includes a rate cut, a pledge to keep rates low for longer and compensation for banks over the side-effects of negative rates, five sources familiar with the discussion said last week. On the other hand, concerns have been building that global central banks are reaching the limits of their stimulus options, especially those with negative interest rates and sub-zero long-term sovereign bond yields. Much of the positive mood in recent days has been driven by optimism that a high-level meeting of U.S. and Chinese negotiators at Washington next month can deliver some sort of trade-war circuit breaker. That was tamped down somewhat by White House trade advisor Peter Navarro on Tuesday, when he urged patience about resolving the two-year trade dispute between the world’s two largest economies and said to “let the process take its course.” But the prospect of a breakthrough stoked appetite for Asian currencies such as the trade-exposed South Korean won, which drifted higher in Asian trading hours and to around 1189.50 per dollar, close to its highest since Aug. 2. The yen, already under pressure as investors spurned safe havens, was further sold overnight after Reuters reported BOJ policymakers are more open to discussing the possibility of expanding stimulus at their board meeting on Sept. 18-19. And the pound has held on to last week’s gains after British parliament passed a law compelling Prime Minister Boris Johnson to seek a delay to the Oct. 31 date for leaving the European Union. Sterling last traded at $1.2353.