Rupee ended weaker, Pound falls vs. Dollar

Thursday,   17-Jun-2021   04:10 PM (IST)

The Indian rupee ended the session sharply weaker at 74.0775/0875 levels compared to its opening at 73.65/66 levels after touching the low of 74.08/09 levels tracking a surge in the dollar index on increasing odds of an early interest rate hike by the Federal Reserve. Rupee traded in the range of 73.57-74.08 levels today. The rupee and most other regional currencies came under pressure today, following a further climb on the dollar index above 91.50 levels. Asian equities and currencies dropped after the 10-year U.S. yield climbed seven basis points following the outcome of the Fed meeting. Indian federal government bond yields were higher tracking a rise in U.S. Treasury yields, but the benchmark note was little changed as traders awaited the outcome of the central bank’s debt purchase today. The frontline S&P BSE Sensex ended at 52,323 levels, down 179 points or 0.34 per cent. The Nifty50 ended at 15,691 levels, down 76 points or 0.48 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 4.08%, 4.22% and 4.36% respectively.

The dollar extended gains on Thursday after the U.S. Federal Reserve surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected. Sterling fell below $1.40 and hit a 10-week high versus the euro on Thursday as markets reacted to a surprise hawkish shift by the U.S. Federal Reserve, boosting the dollar against other major currencies. Fed officials on Wednesday signalled they would raise interest rates and end emergency bond-buying sooner than expected, pushing U.S. Treasury yields higher and equities lower. Fed Chair Jerome Powell told a news conference “inflation could turn out to be higher and more persistent than we expect”. The pound fell 0.7% versus the dollar in late trading on Wednesday after the move, taking it below $1.40 for the first time since early May. It was last broadly flat on Thursday at $1.39840. Against the euro the pound was up 0.4% on the day, hitting 85.42 pence per euro - its highest level since early April. Currency markets are fully pricing in one 25 basis point hike in rates by the Bank of England by December 2022. Since the start of this week, rate increase expectations have also doubled for May 2022, although the market is not yet pricing in a full hike. Data on Wednesday showed inflation in Britain also unexpectedly jumped above the Bank of England’s 2% target in May. BoE officials have said they expect the surge to be temporary while the economy opens up after lockdowns.