Rupee ended tad lower, Dollar lower vs. major currencies

Thursday,   10-Oct-2019   05:27 PM (IST)

The Indian rupee ended the session tad lower at 71.07/08 levels compared to its opening at 70.95/96 levels after touching the low of 71.15/16 levels as a decline in local equities offset the impact of a stronger Chinese Yuan following a report that the U.S. is weighing a currency pact with China. Rupee came off early highs on dollar purchases by foreign banks and on likely foreign fund outflow from local shares. Rupee traded in the range of 70.93-71.15 levels today. Indian government bonds fell for the first time in three sessions, as investors cut positions ahead of domestic September retail inflation data next week and high-level trade talks between the U.S. and China that start today. After a one-day rally, domestic equities once again came under pressure amid brisk selling in banking counters. The S&P BSE Sensex lost 298 points or 0.78 per cent to settle at 37,880.40. The broader Nifty50 index ended at 11,234.55, down 79 points or 0.70 per cent.  In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.59%, 3.76% and 4.98% respectively.

The dollar was on track for its biggest daily drop in five weeks on Thursday against its rivals as the prospects of a partial trade deal between China and the United States fuelled appetite for trade-oriented currencies such as the euro and the Australian dollar. Reports the United States is weighing a currency pact with China that could also see a planned tariff hike next week being suspended fueled a rally in risky assets, though trading remained volatile as negotiations got underway. Against a basket of its rivals, the dollar fell 0.4% to 98.66 and was on track for its biggest single-day drop since Sept. 4. The dollar's weakness ignited a rally in the euro with the single currency rallying 0.5% to a two-week high at $1.10335 as hedge funds cut back their extreme short bets. The euro has been caught in the cross fire between a protracted trade war between the United States and China as the trade-oriented economy has struggled to gain traction this year and pulling the currency down 4% so far this year. Expectations of more rate cuts also weighed on the greenback. Market bets for a quarter point U.S. rate cut has swelled to 85% at its next policy meeting in October compared to 53% a month earlier.