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Rupee opened higher, Dollar holding gains vs. major currencies

Friday,   22-May-2020   10:30 AM (IST)

The Indian rupee opened the day lower at 75.72/73 levels compared to its previous close at 75.6050/6150 levels and slipped further to 75.8450/8550 levels I early deals as the MPC cut rates by a lower-than-expected 40 bps, while China’s move to increase control over Hong Kong also weighed on sentiment. Equity Indian markets declined  even as the Reserve Bank of India (RBI) slashed repo rate by 40 basis points (bps) to 4 per cent and maintained the stance 'accomodative'. Consequently, reverse repo rate now stands at 3.35 per cent from 3.75 per cent earlier. Moreover, RBI Governor Shaktikanta Das said that the GDP growth in FY21 is expected to be in negative territory. At 10:24 AM, the S&P BSE Sensex was trading at 30,818, down 115 point, while the broader Nifty50 was at 9,071.40 down 35 point. Indian government bond yields crashed in early session, with the benchmark yield at a more-than-11-year low, after the country’s rate-setting panel in a surprise move slashed key policy rate by 40 basis points. As per the technical indicators range for the USDINR pair may be 75.60-76.10 levels. Rupee has an immediate support at 75.90 levels. A breach of the same may see rupee at 76.00 followed by 76.15 levels. On the positive side rupee is likely to face resistance at 75.68 levels and if it is able to break the same then it may gain up to 75.56levels followed by 75.47 levels.

The dollar held gains against major currencies on Friday as worries about renewed diplomatic tensions between the United States and China supported safe-haven demand for the greenback. The yuan nursed losses in offshore trade, but further declines may be limited in the local session on Friday as Chinese officials are expected to unveil new economic stimulus measures. Sino-U.S. relations have soured yet again over a broad range of issues, including China's treatment of the former British colony of Hong Kong and its response to the coronavirus pandemic, which is causing risk aversion to spread. The dollar traded at $1.0950 per euro in Asia on Friday, following a 0.3% increase in the previous session. The dollar bought 0.9705 Swiss franc after posting its biggest gain in more than two weeks on Thursday. Sterling held steady at $1.2227 before data later on Friday expected to show a plunge in British retail sales. China is set to impose new national security legislation on Hong Kong after last year's pro-democracy unrest, a Chinese official said on Thursday. U.S. President Donald Trump has warned that Washington would react "very strongly" to the legislation. There is a risk that Hong Kong could lose some of its favourable U.S. trading terms that have helped it maintain its position as a global financial centre. Washington and Beijing are also at loggerheads over Chinese companies' access to advanced technology and criticism of Beijing's response after the novel coronavirus emerged late last year in the central Chinese province of Hubei. The friction stirs memories of last year's drawn-out trade war between the United States and China, which roiled global financial markets. Offshore, the yuan stood at 7.1314 per dollar on Friday after falling in the previous session by the most in three weeks. The focus is on whether the yuan extends declines in onshore trade today. Chinese Premier Li Keqiang is expected to unveil stimulus measures when the National People's Congress starts on Friday to spur its economy, which has been battered by the coronavirus. Elsewhere, the yen held steady at 107.63 per dollar. The Bank of Japan will hold an emergency meeting later on Friday to decide the details of a lending scheme for small companies hurt by the pandemic. The antipodean currencies nursed losses as risk sentiment took a blow. The Australian dollar changed hands at $0.6568 after a 0.4% decline on Thursday, while the New Zealand dollar last stood at $0.6123.