India Rupee Extends Losses On Importer Bids, Dollar Short-Covering

Wednesday,   07-Apr-2021   01:23 PM (IST)

The Indian rupee dropped further against the U.S. currency, weighed down by persistent greenback bids from importers and dollar short-covering. As per market participants, a large oil-to-telecom conglomerate and an engineering major were buying dollars "aggressively" in the spot market while foreign banks were covering their dollar short positions. Meanwhile, India’s benchmark BSE Sensex was up 1.3%, almost recovering from losses in the last two sessions. Earlier in the day, the Monetary Policy Committee expectedly held the repurchase rate at a record low of 4% and decided to continue with its accommodative stance as long as necessary to revive growth. India -- the world’s second-most populous country -- is witnessing a fresh wave of the pandemic that threatens to undermine a nascent economic recovery. National capital Delhi has imposed a night curfew until the end of April. The western state of Maharashtra has also imposed night curfew and a complete lockdown on weekends. The RBI retained its February forecast for the economy to grow 10.5% in the fiscal year that started Apr. 1. It warned that inflation pressures have risen from high commodity prices and logistics costs. Retail inflation is now projected at 5.2% in April-June and in July-September, 4.4% in October-December and 5.1% in January-March, with risks broadly balanced. Meanwhile, Asian currencies were broadly higher amid a further pullback in Treasury yields and on the dollar index. The 10-year U.S. yield was down to 1.67% while the dollar index was near 92.30. The dollar and Treasury yields have dipped in recent sessions despite a series of robust U.S. economic data. Traders have attributed the pullback in the dollar to the retreat in the 5-year Treasury yield, a portion of the yield curve that is being watched closely to assess the confidence that the Federal Reserve will maintain its pledge of not raising rates till 2024. Asian equities were mixed.