Rupee ended higher, Pound higher vs. Dollar

Thursday,   29-Jul-2021   04:15 PM (IST)

The Indian rupee ended the session higher at 74.2850/2950 levels compared to its opening at 74.32/33 levels after touching the high of 74.2350/2450 levels tracking the dollar index’s decline to one-month lows after the Federal Reserve Chairman said more progress was needed in the economy to withdraw stimulus. Rupee traded in the range of 74.2350-74.3425 levels today. The slide in the dollar index and US bond yields was attributed to Fed Chairman Jerome Powell allaying fears about a possible early taper and an earlier-than-expected interest rate hike in the world’s largest economy due to concerns of inflation. Powell said the U.S. central bank was nowhere near considering a rate hike, even as the economy continues to make progress amid concerns over the spread of the highly contagious delta variant of the coronavirus. Asian equities ended higher today. India's federal government bond yields rose for the third consecutive session, ahead of tomorrow's weekly debt sale. Indian shares snapped three sessions of losses to end higher on Thursday, as metal stocks hit record highs on expectations that strong infrastructure spending will fuel demand. The S&P BSE Sensex gained 209 points, or 0.4 per cent, to end at 52,653 levels. The Nifty50, meanwhile, ended tad below 15,800-mark at 15,778, up 69 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.44%, 3.73% and 4.01% respectively.

The pound hit its highest in over a month against the dollar on Thursday, extending gains driven by a fall in coronavirus cases in Britain and as a dovish U.S. Federal Reserve weighed on the greenback. The British currency has gained for five consecutive sessions, and on Thursday was 1.4% higher against the dollar on the week. Currently, sterling was higher on the day at $1.3969, having hit its highest since June 24 against the dollar. The dollar also fell after Fed Chair Jerome Powell’s remark that rate increases were “a ways away”. Against a broadly stronger euro, the pound gained 0.1% to 85.10 pence per euro. Although COVID-19 infection numbers in Britain rose again on Wednesday for the first time in a week compared with the previous day, they were still lower week on week and there was little reaction from the pound. Speculators went net short on the pound for the first time since December 2020 in the week up to last Tuesday, CFTC data showed on Friday. Sterling’s performance has tracked global risk sentiment in recent weeks, with the currency’s performance in line with the direction of global stock markets. On Tuesday, however, the pound surged higher in a seemingly arbitrary move around the daily currency market fix, leaving traders stumped. Traders will look to the Bank of England next week, which appears set to keep its stimulus running at full speed despite two policymakers breaking ranks to suggest that its nearly 900 billion pound ($1.2 trillion) QE programme might have to end early as inflation speeds up. A think-tank said Britain’s government should take on hundreds of billions of pounds of hard-to-sell bonds held by the Bank of England to reduce the risk of the BoE’s independence being questioned when the time comes to raise interest rates.