Rupee ended higher, Dollar lower vs. major currencies

Thursday,   13-Jan-2022   04:03 PM (IST)

The Indian rupee ended the session higher at 73.88/89 levels compared to its opening at 73.90/91 levels after touching the high of 73.85/86 levels tracking a broad dollar decline. However, expectations that the country's central bank is unlikely to allow the rupee to appreciate significantly from current levels capped gains. Rupee traded in the range of 73.85-73.9750 levels today. In the past two sessions, the local unit has not been able to climb above 73.80 amid rumours of RBI intervention and importers rushing to cover their unhedged dollar positions. Indian sovereign bond yields ended lower after the central bank did not announce the rollover of a three-day variable rate reverse repo auction, aiding investor sentiment ahead of the auction of a new 10-year security. Regional equities were mostly mixed after U.S. stocks rose slightly yesterday. The benchmark BSE Sensex ended 0.1% higher, clocking fifth straight day of gains. The benchmark S&P BSE Sensex closed at 61,235 up 85 points, or 0.14 per cent. The NSE Nifty50 ended at 18,258, up 45 points or 0.25 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.68%, 4.54% and 4.81% respectively.

The dollar fell further on Thursday to two-month lows after U.S. inflation proved weaker than feared in December, prompting investors to cut crowded long positions in the currency. The euro was a big beneficiary of the move and extended its rise to $1.1479, up 0.3% on the day, while sterling and the yen also added to their gains. December's monthly U.S. inflation figures published on Wednesday were a fraction higher than forecast and the increase in year-on-year consumer price inflation was as expected at 7% - its biggest jump since June 1982. Nevertheless, traders do not see these inflation readings as urgently shifting an already hawkish Federal Reserve too much. With at least three rate hikes already in the market price, some investors pared bets on further dollar gains. The U.S. index, which measures the greenback against a basket of rival currencies, fell another 0.2% to 94.782. Elsewhere sterling , which has been rallying as traders reckon Britain's economy can survive a surge in COVID-19 cases and that the Bank of England is going to get started on hikes as soon as next month, rose 0.2% to $1.3738. The currency is up more than 4% from December lows and traders have so far shrugged off a political crisis enveloping Prime Minister Boris Johnson who apologised for attending a party in the Downing Street garden during a coronavirus lockdown. The central bank of New Zealand has already begun hiking rates, and the New Zealand dollar rallied to $0.6876, a gain of 0.4% in the session and its strongest since late November. Australia's dollar, which tends to perform well when broader market sentiment is improving, added 0.3% to $0.7305. The Canadian dollar has rallied more than 3.5% in three weeks, gaining with oil prices as investors look past the potential economic fallout of the Omicron variant.