Rupee ended lower, Dollar lower vs. major currencies

Thursday,   25-Feb-2021   04:04 PM (IST)

The Indian rupee ended the session at 72.4150/4250 levels compared to its opening at 72.32/33 levels after touching the low of 72.52/53 levels weighed down by importers’ month-end dollar demand. Moreover, the Reserve Bank of India's decision to exempt some exposures of banks to foreign sovereigns or their central banks from the large exposure framework could result in lesser dollar supply in the sport market in the coming sessions, exerting more pressure on the local unit. The rupee has been a beneficiary of foreign inflows in local equities as well as flows related to dollar bond issuances of major corporates, the latest being that of Bharti Airtel and its subsidiary that is raising $1.25 billion via dollar-denominated bonds. The flows are expected to hit the market in the coming sessions. Rupee traded in the range of 72.32-72.52 levels. Meanwhile, Asian currencies and equities rose. Indian federal government bond yields ended higher despite the central bank’s debt purchases, as traders awaited a weekly debt sale and economic growth data tomorrow. Equity benchmark indices remained parked near day's high for better part of the day, cooling off marginally only during the last hour of trade. The headline S&P BSE Sensex to settle the F&O series for the month of February at 51,039 levels, up 258 points or 0.5 per cent. The Nifty50 index ended at 15,097 levels, up 115 points or 0.47 per cent.  In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.39%, 5.33% and 5.22% respectively.

The dollar index fell to its lowest since early January on Thursday and dropped to three-year lows against the Australian and Canadian dollars, after dovish signals from the U.S. Federal Reserve boosted the reflation trade in currency markets. Easy financial conditions, the promise of fiscal stimulus and accelerating COVID-19 vaccine rollouts have driven money into what’s known as the reflation trade, referring to bets on an upswing in economic activity and prices. Commodity-linked currencies are placed to benefit from a pickup in global trade, while investors have also cheered Britain’s progress in recovering from the coronavirus pandemic. Fed Chair Jerome Powell reiterated on Wednesday that the central bank will not tighten its policy until the economy improves. The Australian dollar, which is considered a liquid proxy for risk appetite, was up 0.3%, after reaching a three-year high of 0.7994 versus the U.S. dollar. The Canadian dollar was also at a three-year high against the U.S. dollar, at 1.2486. The New Zealand dollar was close to the previous session’s three-year highs, flat on the day at 0.7447. Oil prices have rallied around 30% since the start of the year, taking the commodity-linked Norwegian crown to its strongest since late 2018 against the dollar. The euro touched its highest in over a month versus the dollar, briefly rising above $1.22.