Rupee ended weaker, Pound lower vs. Dollar

Wednesday,   07-Apr-2021   04:16 PM (IST)

The Indian rupee ended the session sharply lower at 74.55/56 levels compared to its opening at 73.55/56 levels after touching the low of 74.5550/5650 levels on the back of importer demand for the greenback and dollar short-covering. Some dealers said that 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, given the uneasiness stemming from a surge in Covid cases in the country. Also adding to the fall was technical factors like some positional unwinding and selling in the non-deliverable forward market, some bulk MNC dividend payment, and the RBI’s mostly hands-off approach. Rupee traded in the range of 73.52-74.5550 levels today. 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. The RBI said it will buy one trillion rupees ($13.5 billion) of sovereign bonds through June-end, a move that will infuse rupee liquidity into the market. Meanwhile, Asian currencies were broadly higher amid a further pullback in Treasury yields and on the dollar index. India’s federal government bond yields fell today as sentiment turned bullish after the Reserve Bank of India announced one trillion rupees worth of note purchases through June-end. India’s benchmark BSE Sensex ended 0.9% higher, 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. The benchmark S&P BSE Sensex index gained 460 points, or 0.9 per cent, to end at 49,662 levels while the Nifty index closed at 14,819 levels, up 135 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.17%, 4.39% and 4.57% respectively.

Sterling sank on Wednesday as profit-taking by traders after a strong first quarter for the British currency pulled it to a week’s low against the dollar and its lowest in two weeks against the euro. The pound fell on Tuesday, losing 0.6% against the dollar and over 1% against the euro - its worst day against the single currency in five weeks as investors took cash off the table. The pound was down against the dollar at 1.3820, having hit a one-week low of $1.3771 in early deals. It traded 0.15% lower to the euro at 86.03 pence. Market participants still expected limited losses for the pound. Some also cite seasonal factors such as the end of the tax year in Britain, for expectations that it will appreciate. Expectations of an economic rebound in Britain, spurred by rapid COVID-19 vaccinations, helped sterling to record its best quarter since 2015 versus the euro. With the vaccine programme rolling out rapidly across Britain and infection numbers falling, Prime Minister Boris Johnson confirmed on Monday a planned re-opening of the economy would take place next week. Shops, gyms, hairdressers and outdoor hospitality areas in England will re-open. The government is also looking at a COVID-status certification system, or vaccine passport, to help re-open larger events. Britain will begin the rollout of Moderna’s COVID-19 vaccine in mid-April, vaccine deployment minister Nadhim Zahawi said on Tuesday, adding the inoculation programme was on track to meet government targets.