Rupee ended lower, Euro lower vs. Dollar

Tuesday,   14-Jan-2020   05:26 PM (IST)

The Indian rupee ended the session lower at 70.88/89 levels compared to its opening at 70.74/75 levels after touching the low of 70.9575/9675 levels following a sharp uptick in retail inflation, which offset the positive impact of U.S. removing China from the list of currency manipulators. Rupee traded in the range of 70.74-70.9575 levels today. Wholesale prices-based inflation rose to 2.59 per cent in December, as against 0.58 per cent in November due to increase in prices of food articles. Data yesterday showed India’s retail inflation accelerated to 7.35% in December, the highest since July 2014, on rising food prices. Meanwhile, Asian currencies settled flat to higher after the U.S. dropped its designation of China as a currency manipulator. At close, the Sensex was at 41,952.63 level, up 92.94 points or 0.22 per cent, lifted by gains in HDFC, ITC, Axis Bank and TCS. The Nifty50 settled 32.75 points, or 0.27 per cent, higher at 12,362.30-mark. Indian government bonds fell for a third day, with the benchmark yield posting its biggest rise in six weeks, as a spike in retail inflation beyond the central bank’s top tolerance level strengthened bets of a prolonged rate pause by the central bank. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.77%, 3.99% and 4.17% respectively.

EUR/USD is trading below 1.1130, off the highs. The US removed the currency manipulator label from China, ahead of the signing ceremony of the trade deal. US inflation data is awaited. The British pound dropped to a seven-week low against the euro and a new 2020 low versus the dollar on Tuesday, as investors worried about the state of the economy and speculated that it would lead the Bank of England to cut interest rates this month. Sterling fell sharply on Monday after another BoE policymaker had said he would vote for a cut to rates later this month unless economic data improved significantly. Growth and industrial production data published on Monday were worse than expected, causing a spike in expectations for a rate cut. Money markets are now pricing in a close to 50% chance for a 25 basis point cut to rates from the current level of 0.75%, up from around a 20% chance on Friday. The Japanese yen plumbed eight-month lows while China’s Yuan climbed to its highest level since July on Tuesday as the U.S. Treasury Department reversed its decision in August to designate China as a currency manipulator. The announcement came as Chinese Vice Premier Liu He arrived in Washington ahead of Wednesday’s signing with U.S. President Donald Trump of a preliminary trade agreement aimed at easing tensions between the two countries.