Rupee ended higher, Pound up vs. Dollar

Tuesday,   04-Aug-2020   02:40 PM (IST)

The Indian rupee ended the session higher at 75.05/06 levels compared to its opening at 75.16/17 levels as likely equity-related inflows and upbeat Asian cues offset the impact of speculative dollar buying. Rupee traded in the range of 74.99-75.17 levels. The rupee found support due to upbeat regional risk appetite and the dollar’s decline against most Asian currencies. Domestic equities extended their rally and were trading over 1.5 per cent higher on Tuesday. At 2:06 pm, the S&P BSE Sensex was trading at 37,515 up 574 point, while the broader Nifty50 was at 11,053 up 162 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.68%, 3.54% and 3.64% respectively.

Sterling advanced on Tuesday thanks to a deepening dollar rout though concerns of a second wave of virus infections and a central bank policy meeting later this week capped gains. The pound has reversed nearly all the losses sustained against the dollar in the wake of the pandemic-fueled selloff in March and April and was rising on Tuesday towards a five-month high hit last week versus the greenback. Sterling’s recovery has been impressive in recent weeks. It registered its biggest monthly rise in more than a decade in July even though prospects of a breakthrough in Brexit negotiations with Europe before a December deadline remain elusive. On Tuesday, the pound rose 0.05% to $1.3085 against the dollar and strengthened 0.12% against the European Union’s common currency to 90.09 pence. Signs that dollar weakness has been the major driver of pound gains can be seen from the performance of the British currency versus the euro and the Japanese yen. While it has strengthened nearly 15% versus the greenback since the March lows, it has risen less than 6% against the euro and less than 12% versus the yen in the same period. The pound also faces headwinds from domestic factors as well as global forces. British Prime Minister Boris Johnson said last week he would postpone the next stage of lockdown easing for at least two weeks due to a pick-up in COVID-19 infection rates. In the United States, Democrats in the U.S. Congress and White House negotiators are in talks on a new coronavirus relief bill after a deadline was missed on Friday to extend enhanced unemployment payments during the pandemic. Any delay in unveiling more stimulus measures would fuel another round of selling in risky assets and drag the pound lower. Investors are also awaiting the Bank of England’s policy meeting on Thursday where money markets are already pricing in the prospects of negative interest rates by early next year.