Rupee ended lower, Dollar lower vs. major currencies

Friday,   14-Jan-2022   03:58 PM (IST)

The Indian rupee ended the session lower at 74.15/16 levels compared to its opening at 74.0450/0550 levels after touching the low of 74.21/22 levels on foreign banks’ dollar purchases and as regional equities slumped after more Federal Reserve officials signalled an interest rate liftoff by March. Rupee traded in the range of 74.0450-74.21 levels today. The unit has been flattish over the last two trading sessions amid rumours of intervention from the Reserve Bank of India. Asian currencies were mixed. India's trade deficit in December was at $21.68 billion. India’s sovereign bond yields were higher, as traders awaited the cutoff for the new 10-year note at an auction today that may see another devolvement. Benchmark indices staged a smart-recovery during the second half of the trading session, led by healthy buying in metal and PSU bank stocks, to end the day flat on Friday. The BSE Sensex index closed at 61,223, down 12 points or 0.02 per cent. NSE Nifty ended 2 points down at 18,256 level. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.64%, 4.53% and 4.79% respectively.

The U.S. dollar fell for a fourth consecutive day on Friday to its lowest in more than two months as investors took the view that most of the recent hawkishness from the U.S. central bank has already been priced in. With hedge fund positioning holding close to the highest since early 2020 and terminal U.S. rate pricing signalling peak rates at below 2%, far below the highs of previous Federal Reserve rate cycles, investors took profits on long dollar bets. On Friday, the greenback slipped 0.2% to 94.62 against a basket of currencies, its lowest since early November. On a weekly basis, it is set to weaken 1.11%, its biggest drop since December 2020. On Thursday, it fell below a 100 day moving average for the first time since June 2021. Against its rivals, the dollar's losses were most pronounced versus the Japanese yen and the Chinese Yuan, against which it declined 0.4% and 0.3% respectively. While the safe-haven yen benefited from weakness in global stocks, a Reuters report that the Bank of Japan is deliberating how it can start telegraphing an eventual rate increase sent the Australian dollar and U.S. Treasury yields lower, which also weighed on the greenback. The dollar's doldrums have escalated this week even as U.S. interest rate futures have all but locked in four rate rises this year. But longer-dated yields have fallen slightly on hawkish comments from Fed officials about reducing the bank's balance sheet with Fed fund futures signalling U.S. interest rates will peak by mid-2023. The euro is up more than 1% for the week so far and has punched out of a range it has held since late November, hitting its highest since Nov. 11 at $1.1483. Positioning data on trading platform IG showed traders were largely neutral. Sterling gained, defying a political crisis threatening Prime Minister Boris Johnson's position, with the pound heading for a fourth consecutive weekly gain of more than 0.5%. It was last bought at $1.3730.