Rupee ended higher, Dollar lower vs. major currencies

Wednesday,   24-Feb-2021   04:13 PM (IST)

The Indian rupee ended the session higher at 72.32/33 levels compared to its opening at 72.3550/3650 levels after touching the high of 72.27/28 levels on the back of persistent greenback sales by foreign banks, ahead of the expiry of the February USD/INR currency futures contract today. The rupee had risen to an intra-day high of 72.27 earlier in the session, but had slipped to the day's low of 72.41 on state-run banks’ dollar purchases, likely for the Reserve Bank of India. Meanwhile, the USD/INR February contract expires today. Traders said that given the outstanding position in this contract, there was selling pressure on the USD/INR pair from foreign banks in the spot market, which led to a sharp appreciation in the rupee. Moreover, dollar inflows related to REC’s bond issuance, in which the state-run power company raised $500 million, have also been supportive of the rupee. RBI Governor Shaktikanta Das said in an interview to news channel CNBC-TV18 today that the central bank’s main objective in exchange rate management is to control the volatility on the rupee and that it will continue to maintain the overall stability of the local unit. Indian federal government bond yields ended lower for a second session, as traders awaited a so-called special open market operation tomorrow, after the central bank governor reiterated smooth completion of the borrowing programme and "orderly evolution" of the yield curve. Both BSE and NSE will remain open today till 5 PM. At 3:50 pm, the S&P BSE Sensex was trading at 50,120 up 369 point, while the broader Nifty50 was at 14,800 up 93 point. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 5.19%, 5.77% and 5.50% respectively.

The dollar remained at multi-year lows against the Antipodean currencies and held near a one-month low versus the euro as reflation trades gripped the currency markets on Wednesday. Federal Reserve Chair Jerome Powell reiterated on Tuesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy. The dollar resumed its decline towards the lows recorded at the start of the year after a brief rally in late January. Money flowed from safe havens like the dollar, Swiss franc and the Japanese yen towards currencies expected to benefit from a pick-up in global trade, and to countries like Britain that are recovering quickly from the coronavirus pandemic. Some notable moves were seen in the currency markets this week. The franc weakened below 1.10 francs per euro for the first time since the end of 2019, with a global rise in bond yields also curtailing the appeal of the safe-haven currencies. The dollar’s weakness in recent days has been more remarkable as it comes against the backdrop of a broader rise in U.S. yields. Benchmark 10-year borrowing costs are holding near their highest in nearly a year. The dollar index against a basket of six major currencies was at 90.111, near the six-week low of 89.941 it reached overnight. The Australian dollar, which tends to benefit from rising metal and energy prices, rose to a three-year high of $0.7945 before paring gains to trade 0.1% stronger at $0.7914. The euro bought $1.21495, close to the one-month high of $1.2180 set overnight. The British pound climbed past $1.42 overnight for the first time since April 2018.