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Rupee ended marginally higher, Euro up vs. Dollar

Wednesday,   29-Jul-2020   02:42 PM (IST)

The Indian rupee ended the day marginally higher at 74.7975/8075 levels compared to its opening at 74.83/84 levels after touching the high of 74.7375/7475 levels after the dollar slipped to a fresh over-two-year low on bets that the Federal Reserve will adopt a dovish stance at its monetary policy decision due today. Rupee traded in the range of 74.7375-74.90 levels today. Asian currencies were broadly higher, tracking the dollar’s decline. India government bond yields ended lower for second consecutive session, as short-covering in the benchmark note aggravated the fall in yields, ahead of the auction of a new 10-year note this week. Equity markets were trading with slight cuts in Wednesday's range-bound trade, weighed down by information technology (IT) stocks. At 2:10 pm, the S&P BSE Sensex was trading at 38,152 down 340 point, while the broader Nifty50 was at 11,232 down 69 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.53%, 3.61% and 3.68% respectively.

EUR/USD is trading above 1.1750, resuming its advance as investors eagerly await the Fed decision, where potential new stimulus could be discussed. US fiscal stimulus talks and pending home sales are in play. GBP/USD is trading closer to 1.2966, the highest since March, consolidating previous gains stemming from dollar weakness. Uncertainty about Brexit, Sino-British relations, and the Fed decision are in play.  The dollar index extended its decline and was down 0.2% at 93.50, after sliding to its lowest level since Jun. 14, 2018 earlier today. The Fed is expected to keep interest rates at near-zero percent, but reiterate that rates would remain low until the economy had weathered the coronavirus pandemic and possibly signal a higher tolerance for inflation. Investors will also watch out for indications that the Fed will increase its purchases of longer-dated debt, implement yield caps or target higher inflation than previously indicated. An accommodative stance would push U.S. treasury yields lower and sink the safe-haven dollar. The dollar index remains on course for its biggest monthly decline in a decade. Accommodative monetary and fiscal policies along with hopes of a fiscal stimulus package from the U.S. have reduced the appeal of the greenback.