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Rupee opened higher, Dollar lower vs. major currencies

Wednesday,   13-Jan-2021   10:39 AM (IST)

The Indian rupee opened the day higher at 73.17/18 levels compared to its previous close at 73.2550/2650 levels as decline in US yields halts dollar's upside momentum. India's federal government bond yields lower in early session, as retail inflation for December eased below market expectations. Indian shares rose on Wednesday to a record high, led by gains in Bharti Airtel after the telecom operator-initiated process to increase foreign investment, and ahead of earnings from technology heavy weights Infosys and Wipro due later in the day. At 10:11 AM, the S&P BSE Sensex was trading at 49,690 up 172 point, while the broader Nifty50 was at 14,622 up 59 point. As per the technical indicators range for the USDINR pair may be 73.00-73.40 levels. Rupee has an immediate support at 73.26 levels. A breach of the same may see rupee at 73.36 followed by 73.48 levels. On the positive side rupee is likely to face resistance at 73.07 levels and if it is able to break the same then it may gain up to 72.91 levels followed by 72.83 levels.

The dollar was down on Wednesday morning in Asia, with a retreat in U.S. Treasury yields sapped momentum from the U.S. currency’s recent rally and investors cautiously resumed bets on a continuous slide for the dollar. The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.08% to 89.940. The yuan also held onto gains, with offshore trade at a one-week high at the beginning of Wednesday’s Asian session. Bank of England governor Andrew Bailey played down the notion of negative interest rates to boost growth, saying that “there are a lot of issues” with them during his online speech to the Scottish Chambers of Commerce on Tuesday. Baily’s comments saw the dollar drop more than 1% against the pound. Benchmark 10-year Treasury yields fell nearly 7 basis points from a 10-month high seen on Tuesday, in turn snuffing out the dollar’s three-day rally and pushing it back towards multi-year lows. However, the greenback clung above those levels earlier in the session, with the rally tempering some investors’ confidence in the consensus view that U.S. trade and budget deficits will drive the dollar lower. The Democrat victory in Senate runoff elections in the state of Georgia earlier in the month sparked a bond-market selloff that drove U.S. yields sharply higher, in turn stalling the dollar’s decline. The victory also raised hopes for huge sums of government borrowing to fund the big stimulus measures promised by President-elect Joe Biden when he and his administration take office on Jan. 20. However, the strong demand seen at a $38 billion 10-year auction overnight and comments from Federal Reserve officials reiterating that monetary policy is going to stay supportive could see the dollar back on a downward slide. Investors now await U.S. inflation figures for December, with the Consumer Price Index to be released later in the day. Further data, including the Producer Price Index, core retail sales and industrial production, are due on Friday. Kansas City Fed President Esther George said on Tuesday that she does not expect the Fed to react if inflation exceeds the central bank’s 2% goal, adding that it would take a large surprise to unnerve investors.