Rupee ended higher, Pound falls vs. dollar

Friday,   07-Aug-2020   02:45 PM (IST)

The Indian rupee ended the session higher at 74.9275/9375 levels compared to its opening at 75.05/06 levels after touching the high of 74.9250/9350 levels as foreign banks’ greenback sales offset weak risk appetite in the region due to mounting U.S.-China tensions. Speculative dollar sales, mostly from foreign banks, in anticipation of portfolio flows from private lender Axis Bank and HDFC, kept the rupee supported, traders said. Rupee traded in the range of 74.9250-75.0525 levels. Indian government bond yields saw a fourth straight week of gains, with the benchmark yield posting its biggest rise in six weeks, as bets of an easing in the near term have come down after the central bank yesterday opted for a status quo on policy rates. Equity markets slipped in Friday's range-bound trade, with IT stocks coming under pressure. At 2:10 pm, the S&P BSE Sensex was trading at 37,977 down 49 point, while the broader Nifty50 was at 11,193 down 7 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.38%, 3.50% and 3.62% respectively.

Sterling resumed its role as a risk-driven currency on Friday, falling against the dollar as global market sentiment turned sour after an escalation of U.S.-China tensions. World stocks tumbled and the U.S. dollar rose after U.S. President Donald Trump banned U.S. transactions with two popular Chinese apps: Tencent’s messenger app WeChat and ByteDance’s video-sharing app TikTok. Tensions between the world’s two largest economies has been simmering for months, with the United States blaming China for the novel coronavirus outbreak and moves to curb freedoms in Hong Kong. After three days of falling, the dollar appeared to regain its functioning as a safe haven, rising against a basket of currencies. Cable fell as low as $1.31 just after 0400 GMT and was at $1.3111 by 0736 GMT, down 0.2% since New York’s close. Versus the euro it was broadly steady, at 90.33 pence per euro. Sterling had risen to a five-month high on Thursday after the Bank of England struck a less pessimistic tone about the coronavirus-battered British economy. The central bank said the economy would not recover its pre-pandemic size until the end of 2021. Traders also took confidence from the absence of a signal that the central bank would introduce negative rates. The possibility of negative rates has been cited by analysts as a reason for recent sterling weakness. Britain’s finance minister, Rishi Sunak, said on Friday that hardship lies ahead for the British economy. He said he was optimistic a lot of the emergency government-backed loans given to companies during the pandemic will be repaid, and that a trade deal with the European Union was still possible in September. Britain’s transition period with the EU is due to end on Dec. 31, after which it will leave the single market and customs union. No post-Brexit trade deal has been struck, leaving the City of London set to lose unfettered access to its biggest customer.