Rupee ended almost flat, Pound up vs. Dollar

Thursday,   13-Aug-2020   02:47 PM (IST)

The Indian rupee ended the session little changed at 74.84/85 levels compared to its opening at 74.82/83 levels as likely intervention by the central bank limited the upside on the local currency stemming from portfolio flows and a weaker dollar index. Rupee traded in the range of 74.7850-74.94 levels today. The rupee had fallen to the day’s low of 74.94/95 on dollar purchases by a few state-run banks, likely on behalf of the Reserve Bank of India. In Asia, currencies were mixed while equities ended mostly higher. Indian government bond yields ended little changed, as traders kept the sidelines ahead of the release of retail inflation data for July to gauge the likely direction of policy rates, as well as tomorrow’s debt supply. Equity markets fluctuated between gains and losses in Thursday's volatile session. At 2:08 pm, the S&P BSE Sensex was trading at 38,337 down 33 point, while the broader Nifty50 was at 11,309 up 1 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.47%, 3.63% and 3.75% respectively.

Sterling rose against the dollar on Thursday, driven by dollar weakness as traders shrugged off Wednesday’s dismal GDP data but remained cautious about the longer-term economic outlook for Britain. Markets were bearish in early trading, with European stocks down and the dollar weaker as investors started to lose hope that the U.S. government would agree on a stimulus deal to support the economy and the millions of workers who have lost their jobs. Britain’s economy shrank by a record 20.4% in the second quarter - a substantially bigger slump than in the euro zone (12.1%) or United States (9.5%), data on Wednesday showed. But the pound did not decline significantly on the news, which was outweighed by dollar weakness by the end of the session, which pushed cable up. Sterling was at $1.3091. So far in August, it has been broadly in line with its pre-pandemic levels. Versus the euro it was little changed, at 90.46 pence per euro. The next flashpoint for global market sentiment is likely to be Saturday, when top U.S. and Chinese officials will meet to review the progress of their phase one trade deal. Even though dollar weakness boosts cable, investors are generally bearish on the pound. There is expected to be a lag in Britain’s labour market recovery later in the year, after the government’s furlough scheme ends in October. Analysts said that uncertainty over the trajectory of the coronavirus was also limiting the pound. Britain changed its methodology for counting COVID-19 deaths on Wednesday, but the new death toll was still the highest in Europe. Brexit is also weighing on the outlook for sterling, with Britain due to leave the single market and customs union on Dec. 31 whether or not a deal has been reached. Britain said on Thursday it would step up demands for the United States to drop tariffs on goods such as single malt Scotch whisky, after industry warnings.