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Rupee ended lower, Dollar higher vs. major currencies

Monday,   18-Oct-2021   04:03 PM (IST)

The Indian rupee ended the session lower at 75.34/35 levels compared to its opening at 75.25/26 after touching the low of 75.39/40 levels weighed down by a rise in Brent crude to fresh multi-year highs and the dollar index resuming its climb. The rupee largely flip-flopped between 75.25 and 75.39 in the session amid importer hedging and local equities clocking fresh highs. The rupee and most other Asian currencies had to contend with another uptick in oil prices that sent the benchmark Brent contract above $86 per barrel to a fresh three-year high. Meanwhile, the rupee found support from gains in local equities. Indian federal government bond yields were higher as a further rally in crude oil prices raised inflation worries, while higher U.S. Treasury yields also hurt sentiment. The key benchmark indices extended their winning streak for the seventh straight day, ending at fresh record highs. The BSE benchmark index ended 460 points higher at 61,766. The NSE Nifty settled 139 points higher at 18,477. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.74%, 3.81% and 4.27% respectively. India’s money and forex markets will be closed tomorrow on the occasion of Id-E-Milad.

The U.S. dollar headed back on Monday towards a one-year high hit last week as rising inflation expectations and higher bond yields boosted its appeal against its rivals, with the New Zealand dollar bucking the trend thanks to strong data. U.S. Treasury yields firmed on Monday, extending a trend in recent weeks with five-year bond yields rising to their highest levels since February 2020 as investors ramped up bets that the U.S. Federal Reserve was preparing to raise interest rates as early as next year. The inflation outlook has also prompted expectations of earlier tightening of global monetary policy, with Danske Bank expecting as much as two rate hikes from the Fed in the second half of next year. The dollar index rose 0.1% to 94.02, edging it back toward last week’s one-year high of 94.563 which was the highest level since September 2020. In New Zealand, where consumer prices zoomed higher at their fastest clip since 2010, analysts reckoned the central bank would need to stay the course on its hiking trajectory even as the lockdown of Auckland was extended. The kiwi was an outlier, having jumped almost 0.5% to a one-month high of $0.7105 before easing back to flat at $0.7070 after a decade-high quarterly inflation reading.  Sterling also managed to hold on close to steady after hawkish weekend remarks from Bank of England Governor Andrew Bailey who said policymakers “will have to act” as energy prices drive consumer prices higher. In other data highlights, China’s economic growth hit its slowest pace in a year in the third quarter, with power shortages crimping factory output - while in commodities, crude prices rose more than 1% to test 2018 highs. The yuan eased slightly after the data. But taken together, China’s slowdown, power crunch and worldwide signs that pressure from energy costs is hurting, seemed to turn investors broadly cautious as they brace for a bumpy period.