Rupee ended off highs, Pound rose vs. Dollar

Monday,   01-Jun-2020   02:30 PM (IST)

The Indian rupee ended the session off high at 75.54/55 levels compared to its opening at 75.3450/3550 levels after touching the low of 75.6125/6225 levels as private banks’ dollar bids trimmed early gains stemming from stronger local equities. Rupee touched the high of 75.2850/2950 levels in morning deals today tracking a surge in local equities after the federal government announced a phased re-opening of the economy battered by the coronavirus pandemic. The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, increased to 30.8 last month from April's record low of 27.4, still well below the 50-mark separating growth from contraction. Indian government bond yields ended higher for a fifth consecutive session on concerns over the country's widening fiscal deficit and as a lack of steps so far by the central bank to absorb the additional supply weighed.  Indian equity markets shot up over 2 per cent each on Monday, in line with their Asian peers, after the government eased curbs on most economic activities even as the lockdown in containment zones was extended till June 30. At 2:13 pm, the S&P BSE Sensex was trading at 33,305, up 881 point, while the broader Nifty50 was at 9,832 up 252 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.51%, 3.54% and 3.68% respectively.

The pound rose to three-week highs against a broadly weaker dollar in early London trading on Monday as Britain eased some lockdown restrictions, but the market’s net short position on sterling is the largest in more than five months. New rules designed to ease the lockdown in England came into force on Monday, even though scientists warned that, in the absence of a functioning system to track new outbreaks, the move was risky. The new rules do not apply to Wales, Scotland and Northern Ireland. A fourth round of trade talks on relations with the European Union following Britain’s departure from the bloc will start this week. Britain has until July 1 to ask for an extension to the current transition period which is due to end in December. The pound is being weighed down by a number of factors: Britain’s high COVID-19 death rate, a lack of progress in Brexit negotiations, a bleak economic outlook, and the Bank of England (BoE) considering negative interest rates. Against a broadly weaker dollar, the pound hit a three-week high of $1.2426, up 0.6% on the day. Versus the strengthened euro, the pound was last down around 0.1%, at 89.77 pence. The market’s net short position on the pound increased for the twelfth week running in the week ending May 26, according to weekly positioning data. The last time investors were this bearish on the pound was in the run-up to the December 2019 election.