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Rupee ended higher, Pound lower vs. Dollar

Wednesday,   24-Nov-2021   04:02 PM (IST)

The Indian rupee ended the session higher at 74.3950/4050 levels compared to its opening at 74.5250/5350 levels in a volatile trading session, as exporters’ dollar sales helped the local unit weather the impact of a further rally in crude oil prices. It had hit an intraday low of 74.5450 in early trades, as crude oil prices extended yesterday’s gains. Rupee traded in the range of 74.3050-74.5450 levels today. Crude prices rose despite the U.S. deciding to release millions of barrels of oil from its strategic reserves in coordination with major consumer nations including India. Meanwhile, Asian currencies were flat-to-lower and the dollar index was near 16-month highs ahead of the release of the minutes of the Federal Reserve's latest policy meeting. Indian federal government bond yields marginally rose for the second straight day as higher crude oil prices led to investor concerns about the country’s inflation trajectory. After holding gains for a major part of the trading day, the key benchmark indices nose-dived to lower levels in late deals dragged by weakness in key index heavyweights like Infosys, ITC and Reliance Industries. The BSE benchmark index, the Sensex ended 323 points lower at 58,341. The NSE Nifty ended with a loss of 88 points at 17,415. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.91%, 3.98% and 4.78% respectively. 

The British pound was little changed on Wednesday, within striking distance of its 11-month low against the dollar, as expectations for a rate hike supported the greenback. Meanwhile, investors remained focused on whether or not the Bank of England will raise interest rates at its December meeting, while they wondered about the impact of the new wave of COVID-19 cases across the continent. It hit its lowest level since Dec. 22, 2020, on Tuesday at $1.334, as the renomination of Federal Reserve Chair Jerome Powell strengthened market expectations of U.S. rate rises next year. According to ING analysts, the pound is looking less vulnerable than the euro to the pandemic, although markets might be reluctant to speculate that Britain will dodge another COVID-19 severe wave. But, a decisive move below 84 pence against the euro “may signal investors are starting to price in diverging contagion/growth paths for the UK and the eurozone, something similar to what we saw at the beginning of the vaccination programme in 1Q21,” they said in a research note. Sterling was down 0.1% at 84.13 pence versus the euro, after hitting its highest since February 2020 on Monday at 83.8 pence. Although the pound picked up support earlier this month from rate hike talk, investors are increasingly wary of the outlook for UK yields. Bank of England (BoE) Governor Andrew Bailey raised further uncertainty over the weekend on the possibility of a rate hike in December by saying the inflation debate in Britain is finely balanced, according to analysts. Bailey said on Tuesday he might further scale back guidance on central bank policy, and the central bank could return to stating that the BoE would make decisions on a meeting-by-meeting basis.