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Rupee ended tad higher, Euro lower vs. Dollar

Tuesday,   28-Jul-2020   03:25 PM (IST)

The Indian rupee ended the session tad higher at 74.83/84 levels compared to its opening at 74.86/87 levels after touching the high of 74.71/72 levels. Rupee traded in the range of 74.71-74.9050 levels today. Dollar purchases by state-run banks, likely on behalf of the central bank, offset gains from flows related to a rights issue. Rupee had risen to the day’s high of 74.71 on dollar sales by three large foreign banks, traders said. This could be an inflow-based selling, related to Mahindra Finance’s 30.89-billion-rupee ($413.24 million) rights issue, they added. The issue opened for subscription today and will close on Aug. 11. However, the impact of the flows was negated on aggressive dollar purchases by three state-run banks, which could be on behalf of the central bank to shore up its reserves. Asian currencies turned lower in the wake of the dollar’s rebound. The Indian equity markets climbed higher on Tuesday, tracking gains from its Asian peers. At 2:40 pm, the S&P BSE Sensex was trading at 38,466 up 531 point, while the broader Nifty50 was at 11,282 up 150 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.65%, 3.59% and 3.66% respectively.

The euro retreated from its two-year high on Tuesday as dollar sales declined before a two-day Federal Reserve meeting, during which investors expect its outlook will be reaffirmed. No monetary policy changes are likely, but traders are speculating about a change in emphasis in the Fed’s forward guidance at the meeting, which starts on Tuesday. Some dollar weakness came amid political wrangling over the next U.S. fiscal rescue package. The Republican leadership of the U.S. Senate introducing a proposal for the next coronavirus relief package, a $1 trillion plan called the Heals Act, but concerns were still evident over the details. The euro was last trading down 0.3% at $1.1715, off the $1.1781 two-year high reached the day before. The dollar rose the same amount versus the pound and the Japanese yen. The New Zealand dollar fell the most against the greenback, sliding 0.6% to 0.6644. The dollar had been tumbling since May and was dumped in recent days as flaws in the U.S. coronavirus recovery and crumbling yields sent investors elsewhere. Most analysts say the reasons for the dollar’s decline, especially falling real yields, remain intact, but the pace of the drop probably warranted a pause - particularly with a Fed meeting and a U.S. spending package in the offing. U.S consumer confidence and manufacturing data due at 1400 GMT will also provide evidence on the U.S. economic recovery. Traders pushed the cost of one-month euro/dollar options to a four-month high on Tuesday, suggesting money managers were preparing for unexpected moves in the pair in coming weeks. Elsewhere, the Turkish lira was close to record lows after it plunged 2% in minutes on Monday before reversing most of that fall. The lira has fallen about 7% against the euro in two months. It was virtually flat against the dollar.