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Rupee opened lower, Dollar lower vs. major currencies

Wednesday,   07-Apr-2021   10:53 AM (IST)

The Indian rupee opened the day lower at 73.55/56 levels compared to its previous close at 73.43/44 levels and slipped sharply to 73.85/86 levels in early deals as the central bank revised inflation prediction upwards. The Reserve Bank of India (RBI) kept interest rates steady at record lows on Wednesday, as widely expected, amid concerns rising COVID-19 infections could derail the country's nascent economic recovery. The RBI held the repo rate, its key lending rate, at 4% and kept the reverse repo rate, the borrowing rate, unchanged at 3.35%. The benchmark 5.85% bond maturing in 2030 was at 97.98 rupees, yielding 6.13%, against 98.03 rupees and 6.12% yield at the previous close, after MPC maintained rates and accommodative stance, while announcing a one-trillion-rupee bond purchase programme. The benchmark BSE Sensex and the broader NSE index were trading 0.59% and 0.65% higher, respectively, tracking Asian peers, even as India posted its biggest single-day jump in fresh coronavirus infections. At 10:43 AM, the S&P BSE Sensex was trading at 49,493 up 291 point, while the broader Nifty50 was at 14,773 up 89 point. As per the technical indicators range for the USDINR pair may be 73.45-74.10 levels. Rupee has an immediate support at 73.85 levels. A breach of the same may see rupee at 73.98 followed by 74.15 levels. On the positive side rupee is likely to face resistance at 73.50 levels and if it is able to break the same then it may gain up to 73.37 levels followed by 73.16 levels.

The dollar softened to a two-week low against a basket of currencies on Wednesday after U.S. bond yields declined as traders rolled back aggressive expectations that the Federal Reserve will tighten its policy earlier than pledged. The dollar index wallowed near a two-week low of 92.314, slipping further from a five-month high of 93.439 set on March 31. The euro rallied to a two-week high of $1.18785 and last stood at $1.1871. The common currency jumped almost a pence against the British pound overnight to trade at 85.90 pence, its biggest gain since Dec. 10.  The dollar changed hands at 109.77 yen, extending its retreat from a one-year high of 110.97 touched a week ago. The dollar’s decline came as investors recalibrated their expectations that the Federal Reserve will tighten its policy earlier than it has suggested. Financial markets have expected accelerating U.S. economic growth and inflation could force the Fed to abandon its pledge earlier, with interest rate futures pricing in a rate hike as early as late 2022 earlier this week. The five-year U.S. Treasury yields, however, dropped sharply to 0.874% after hitting a 14-month high of 0.988% on Monday. The five-year Treasury yield is now seen as a major barometer of how much faith investors have in the Federal Reserve’s pledge that it does not expect to raise interest rates until 2024. Traders saw the dollar’s retreat as a correction after its rally last month. In particular, against the yen, the dollar made its biggest monthly gains in more than four years in March, rising almost 4%. Elsewhere the Australian dollar held firm near two-week high against the dollar at $0.7661 while the British pound slipped to $1.3830 from Tuesday’s two-week high of $1.3910. Bitcoin was flat at $57,966.