Rupee ended tad lower, Pound firm vs. Dollar

Wednesday,   16-Jun-2021   04:06 PM (IST)

The Indian rupee ended the session little changed at 73.3225/3325 levels compared to its opening at 73.29/30 levels as traders awaited the U.S. Federal Reserve’s forecasts on inflation, unemployment and the likely path of interest rates. Rupee had briefly slipped to an intraday low of 73.38/39 levels on importer hedging amid a further spike in crude oil prices. Rupee traded in the range of 73.26-73.38 levels today. The benchmark Brent crude contract rose to a 26-month high of $74.73 per barrel today on expectations of a robust demand recovery and as prospects of extra supply coming to the market soon from Iran faded. The contract is headed for its fifth consecutive day of gains. However, the key focus for markets was the Fed’s rate decision later today. Indian federal government bond yields rose for a second consecutive session as a crude oil price spike heightened concerns over inflation that recently breached the central bank’s tolerance ceiling. The benchmark S&P BSE Sensex settled the day at 52,502 levels, down 271 points or 0.51 per cent. The Nifty50 index erased 102 points, or 0.64 per cent, to close at 15,768 levels. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.27%, 4.28% and 4.44% respectively.

Sterling firmed on Wednesday after data showed British inflation unexpectedly jumped above the Bank of England’s 2.0% target in May raising some concerns that policymakers may start signalling a shift in policy thinking if prices extend their rising streak. Inflation hit 2.1% in May, outpacing forecasts and looks set to rise further as the country re-opens its economy after its coronavirus lockdowns. Against a broadly steady dollar, the British pound rose to $1.4112 homing in on a 2021 high of $1.4250 hit at the start of June. Against the euro, the British currency rose 0.25% to 85.94 pence. While the rise in inflation is largely driven by local factors, the Bank of England will be keenly watching whether a stronger currency will help ease price pressures. The British currency is one of the best performing currencies versus the dollar this year with a net 3.3% rise so far in 2021. In response to the data, two-year British government bond yields rose nearly one basis point to 0.11% to a one-month high.