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Rupee ended higher, Pound lower vs. Dollar

Monday,   13-Sep-2021   04:05 PM (IST)

The Indian rupee ended the session lower at 73.67/68 levels compared to its opening at 73.60/61 levels after touching the low of 73.7325/7425 levels tracking broad dollar strength amid expectations of an earlier-than-expected bond taper by the Federal Reserve. Importers hedging their near-term payables also contributed to the rupee’s fall. Rupee traded in the range of 73.58-73.7325 levels. The rupee, along with most other Asian currencies, came under pressure following the dollar index’s climb to 92.88 today, its highest level in over two weeks. Indian federal government bond yields rose at the start of the week after a finance ministry official said New Delhi will borrow in the second half of this fiscal year to fund the Goods and Services Tax compensation (GST) to states. Most Asian equities started off on a weak note, but managed to recoup losses to end higher. Benchmark indices started the week on a choppy note as the S&P BSE Sensex gyrated 370 points in the intra-day trade before settling 127 points, or 0.22 per cent, lower at 58,178 levels. NSE closed at 17,355 levels, down 14 points or 0.08 per cent.  In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.36%, 3.50% and 3.79% respectively.

Sterling slipped on Monday, pulling back further from a one-week high against the dollar hit on Friday as investors wait for more data to assess the pace of the post-lockdown economic recovery and how soon interest rates could he hiked. Figures on July jobs are scheduled for Tuesday while inflation and retail sales data will be published on Wednesday and Friday respectively. The Bank of England expects inflation to rise sharply this year and hit a peak of 4%. A strong reading for inflation would reinforce expectations that the Bank of England (BoE) is set to tighten its monetary policy quicker than the European Central Bank or the U.S. Federal Reserve. Comments by Bank of England Governor Andrew Bailey sent the pound upwards last week when he said he was among those who thought the minimum conditions had been reached to consider an interest rate hike. The announcement of a UK tax hike to fund health spending and social care had weighed on the pound earlier as it could theoretically ease pressure on the BoE to tighten monetary policy as it might slow down the recovery. Investors are also now looking out for signs that more fiscal tightening could be on the way from Boris Johnson’s government. Currently, the pound was down against the dollar at 1.3818 and slightly higher against the euro at 0.8534 pence. According to weekly futures data, speculators increased their net short position on the pound in the week to Sept. 7, showing the speculative market is the most bearish on the pound versus the dollar since July 2020.