Rupee ended lower, Pound slightly higher up vs. Dollar

Tuesday,   07-Dec-2021   04:08 PM (IST)

The Indian rupee reversed intraday gains and ended the session lower at 75.44/45 levels compared to its opening at 75.31/32 levels after touching the low of 75.4950/5050 levels as strong dollar bids from state-run banks ahead of large corporate outflows offset the benefits of an early rise. Rupee had risen to 75.26 earlier today, tracking Asian currencies and China’s moves to support its economy, before tumbling to 75.50, its lowest since Oct. 13. Rupee traded in the range of 75.26-75.4950 levels today. Traders speculated that state-run banks had been bidding aggressively in the last couple of hours to meet dollar demand ahead of a reported $1 billion outflow. According to media reports, India needs to pay around $1 billion to Cairn India, and the outflow is expected over the next few days. The local currency had gained earlier in the session, in line with Asian peers, as the Chinese Communist Party’s top decision-making body said yesterday it would work towards a positive cycle of the nation's real-estate sector, and signalled that restrictions on the real estate sector would be relaxed in 2022. Indian federal government bond yields edged higher as investors remained divided on the likelihood of a reverse repo rate hike by the rate-setting panel tomorrow, while a rise in U.S. Treasury yields also weighed on sentiment. The BSE Sensex settled with a gain of 887 points at 57,634. The NSE Nifty settled with a gain of 264 points at 17,177. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.62%, 3.67% and 4.50% respectively.

Sterling was slightly higher on Tuesday, while some in the market bet that the Bank of England will raise interest rates in February 2022 after keeping them unchanged this month. In a research note late on Monday, JP Morgan said it reckoned the BoE would buy more time as "the emergence of the Omicron variant has introduced new uncertainty about the timing of the first tightening" and will "begin tightening next February". According to analysts, last week’s comments by BoE officials expressed more caution about when the process should begin. BoE Deputy Governor Ben Broadbent reignited some hopes for an interest rate hike when he said on Monday that inflation in Britain might "comfortably exceed" 5% in April next year and that the country's tight labour market risked becoming a more constant source of inflation. Sterling strengthened 0.1% versus the dollar to $1.327 at 0848 GMT. The dollar was supported, hanging on to gains made with U.S. yields as investors hoped early signs the Omicron variant may be mild would be borne out. Versus the euro , the pound was 0.1% higher at 85.21 pence, after touching an almost one-week low at 85.1 pence. Britain's health minister said on Monday there was now community transmission of the Omicron variant of the coronavirus across regions of England, but it was too early to tell if this would "knock us off our road to recovery".