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Rupee opened sharply lower, Dollar holding gain vs. Yen

Friday,   08-Nov-2019   09:05 AM (IST)

The Indian rupee opened the day sharply lower at 71.30/31 levels compared to its previous close at 70.9550/9650 levels after Moody's cuts India’s outlook to negative from stable, citing risks of entrenched economic slowdown. Risks of prolonged slowdown partially reflect lower government and policy effectiveness in addressing long-standing economic weaknesses than previously estimated, Moody’s says. Most Asian currencies and equities lower amid doubts over China tariffs removal. Reuters reports that rollback of China tariffs facing opposition in White House. Chinese Yuan edges lower to 6.9776. Brent crude is down at $62.20. Indian government bonds sharply down in early trade, with benchmark bond falling to over two-week low, after Moody’s Investors Service cut India’s credit rating outlook to negative from stable. Equity markets opened a shade lower. At 9:18 AM, the S&P BSE Sensex was trading at 40,603, up 133 point, while the broader Nifty50 was at 11,998, up 32 point. As per the technical indicators range for the USDINR pair may be 70.85-71.35 levels. Rupee has an immediate support at 71.31 levels. A breach of the same may see rupee at 71.38 followed by 71.47 levels. On the positive side rupee is likely to face resistance at 71.11 levels and if it is able to break the same then it may gain up to 71.02 levels followed by 70.84 levels.

The dollar held on to its gains versus the yen and the Swiss franc on Friday as a China-U.S. agreement to roll back tariffs on each others' goods supported riskier assets, even as some reports suggest a preliminary trade pact is far from a done deal. The yen also nursed losses against the euro and the Australian dollar as progress in resolving a 16-month long trade war between the world's two largest economies weakened demand for safe havens. China and the United States have agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed, officials from both sides said on Thursday. However, there is still some scepticism about a trade deal as officials inside and outside the White House have bristled at the notion of giving up punitive tariffs. Muddying the water further, White House spokeswoman Stephanie Grisham told Fox News Channel in an interview on Thursday that the United States is "very, very optimistic" about reaching a trade deal with China soon. Sterling traded near a two-week low after Bank of England unexpectedly voted to cut interest rates due to uncertainties posed by Britain's fraught exit from the European Union. The remaining seven policy makers on the board voted to keep policy unchanged, but Governor Mark Carney and others said they would consider a cut in the future. On the whole, sentiment is likely to remain supportive for the dollar, equities and other risky assets as a de-escalation in the U.S.-China trade war removes a huge risk to the global economic outlook. The dollar index stood at 98.136, up 1% this week. Trump has used tariffs on billions of dollars of Chinese goods as his primary weapon in a trade war that has hurt global growth and rattled financial markets in the past year. The dollar held steady at 109.34 yen in Asia on Friday, close to a five-month high, and is headed for a 1.1% gain for the week. The greenback edged higher to 0.9953 Swiss franc, on course for a 1% gain. The pound traded a $1.2815, close to the lowest since Oct. 24. Cable was on course for a 1% decline this week. The announcement of the 7-2 split weighed on sterling as market odds on a cut next year rose as high as 80%. To date, the BoE has resisted following the U.S. Federal Reserve and the European Central Bank in cutting its main interest rate, but the outcome of Thursday's meeting suggests the BoE is poised to change its stance on monetary policy.