Rupee ended lower, Pound lower vs. Dollar

Monday,   20-Sep-2021   04:04 PM (IST)

The Indian rupee ended the session lower at 73.7350/7450 levels against the dollar as risk appetite in the region faltered, sending investors towards the safety of the dollar. Rupee opened lower at 73.8125/8225 levels today but trimmed some losses to move up to 73.6225/6325 levels on exporters covering their receivables. Rupee traded in the range of 73.6225-73.8175 levels. China Evergrande is struggling to make loan payments on its more-than-$300 billion in liabilities and there are worries that the company will not be able to make a payment due this Thursday. Some analysts said that the default could indicate the start of a housing market bubble, prompting a broad risk-off across asset classes. Shares in Hong Kong tumbled more than 3%, leading Asian equities lower, amid worries over the impact of the debt crisis, while most European bourses were down at least 2% each.  Traders are awaiting the Fed’s rate decision, due Wednesday, when the U.S. central bank is expected to provide more details on its taper timeline this year. Apart from cues on taper, investors will be looking at the Fed’s new dot plots to gauge what policymakers reckon will be a likely timeline for an interest rate increase. Indian federal government bond yields fell at the start of the week as optimism about the inclusion of local debt in global bond indices this fiscal year following comments by a ministry official. The benchmark indices tumbled for the second day on Monday. Both the indices ended the volatile session near day's low. The BSE Sensex shed 525 points to end at 58,491 while the NSE Nifty closed the day at 17,397, down 188 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.53%, 3.59% and 3.85% respectively. 

Sterling hit a one-month low against the dollar on Monday as a global sell-off prompted by China’s struggling Evergrande hit risk-oriented currencies while uncertainties about the Bank of England’s monetary policy and surging gas prices also weighed. Currently, the pound was about 0.5% lower against the dollar at $1.3660, its lowest level since Aug. 23. Versus the euro, sterling was down 0.32% at 0.8561 pence, a low not reached since Sept. 9. A sell-off in Asia where the world’s most indebted property developer China’s Evergrande plunged to over 11-year lows spread to Europe with the pan-European STOXX 600 falling 1.90% and London’s FTSE 100 1.55%. Investors turned to the safe haven of the greenback which firmed to a four-week high, with the dollar index reaching 93.4. Britain is considering offering state-backed loans to energy firms after wholesale gas prices soared, prompting big suppliers to ask for support from the government to cover the cost of taking on customers from companies that have gone bust. Another headache for traders were the uncertainties linked to what could emerge about the future of monetary policy at the Bank of England meeting on Thursday. BoE rate-setters who may be tempted to vote next week for an early end to their COVID-19 stimulus plans are likely to hold off for now, with a slowing economy but surging inflation making for a tricky backdrop. Last month, Michael Saunders was the only Monetary Policy Committee member to vote for an early end to the British central bank’s purchases of government bonds, on the basis that continued buying risked a more aggressive tightening of monetary policy in future. Since then, BoE Governor Andrew Bailey revealed that four of the eight MPC members who voted last month - himself included - thought some initial conditions had been met to begin exploring the possibility of raising interest rates.