Rupee ended steady, Dollar remains weak vs. major currencies

Wednesday,   05-Aug-2020   02:42 PM (IST)

The Indian rupee ended the session at 74.94/95 levels compared to its opening at 74.9250/9350 levels as the dollar index resumed its decline amid falling U.S. Treasury yields, while investors eyed progress on the next round of U.S. fiscal stimulus for further cues. Rupee traded in the range of 74.83-74.9450 levels today. The rupee got a further boost today on speculative dollar sales in anticipation of portfolio flows from private lender Axis Bank that launched a 150-billion-rupee ($2 billion) share sale yesterday, traders said. Flows from the equity stake purchases in Bandhan Bank also aided, they added. Indian federal government bond yields ended largely unchanged in a lackluster session as traders played safe and kept to the sidelines, awaiting the rate-setting panel’s policy decision due tomorrow. Domestic equities turned volatile in the afternoon session on Wednesday.  At 2:10 pm, the S&P BSE Sensex was trading at 37,667 down 20 point, while the broader Nifty50 was at 11,105 up 10 point. The Nikkei/IHS Services Purchasing Managers’ Index increased to 34.2 in July from 33.7 in June; however, it was still well below the 50-mark separating growth from contraction. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.46%, 3.46% and 3.58% respectively.

The dollar remained weak on Wednesday as a U.S. coronavirus relief package stalled in Congress and U.S. bond yields sank, with investors weighing prospects of further monetary easing to support the economy. White House negotiators and congressional Democrats are trying to reach a deal on a package by the end of this week, ad Treasury Secretary Steven Mnuchin said on Tuesday that progress had been made on key components of the bill. A hardening perception that the U.S. economic recovery is lagging Europe has buttressed the euro, pushing it above $1.19 in the last couple of days. Most other major currencies were also up against the dollar, pushing its index towards last week’s two-year low of 92.53. It traded at 93.05 as the price for gold surpassed $2,000, a record high. U.S. 10-year Treasury yields were close to the five-month low they hit on Tuesday. Final U.S. PMI numbers are also due later in the day. Growth in China’s services sector showed signs of a slowdown in July from a ten-year high the previous month, as new export business fell and job losses continued, a sister survey showed on Wednesday, pointing to cracks in the sector’s post-COVID recovery.