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Rupee ended lower, Dollar higher vs. major currencies

Tuesday,   25-Jan-2022   04:06 PM (IST)

The Indian rupee ended the session lower at 74.7750/7850 levels compared to its opening at 74.57/58 levels after touching the low of 74.8050/8150 levels as regional equities and currencies slumped on the probability that the Federal Reserve will normalize monetary policy at a faster pace. Rupee traded in the range of 74.57-74.8050 levels today. Risk aversion in the region accelerated amid speculations of quicker-than-expected interest rate hikes by Fed. The Fed begins its two-day policy meeting later today and the decision is due after Asia market hours tomorrow. Investors will be parsing the meeting for hints on the timing and pace of rate hikes, and the pace at which the U.S. central bank will reduce its more-than $8 trillion balance sheet. Crude oil prices resumed their climb amid potential for military conflict between Russia and Ukraine. India’s federal government bond yields ended largely unchanged as investors awaited the U.S. Federal Reserve’s monetary policy decision. Equity markets reversed losses during the second half of the trading session as global markets looked to stabilize post a manic Monday. The S&P BSE Sensex pushed the index 367 points higher at 57,858 level at close. The NSE Nifty staged a smart recovery of 441 points to end at 17,278, up 129 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.85%, 4.74% and 4.64% respectively. Indian financial markets will be closed tomorrow for Republic Day.

The dollar edged higher on Tuesday to within striking distance of its two-week peak, as investors bought safe-haven currencies amid tensions between Russia and the West over Ukraine while awaiting the outcome of the Federal Reserve's policy meeting. The U.S. military put about 8,500 troops on alert to be ready to deploy to Europe if needed, in the latest effort to reassure jittery NATO allies in the face of a Russian military build-up near Ukraine. The safe-haven yen gained 0.3% versus the euro and 0.1% against the dollar, remaining within striking distance of its one-month highs. The Fed could firm up plans to raise rates and shrink its holdings of U.S. Treasury bonds and mortgage-backed securities that have swollen its balance sheet past $8 trillion at its meeting that ends on Wednesday. Analyst views about the meeting are mixed, with Deutsche Bank flagging a potentially hawkish surprise over the months ahead, with the possibility the Fed raises rates in March and increases them as many as six or seven times this year. Money markets are pricing an 85% chance of a 25 basis point Fed hike in March and three more to 1.0% by year-end. Bitcoin, which has almost halved in value since touching a $69,000 record in November, lost 2% to trade around $36,089. Meanwhile, ether, the world's second-largest cryptocurrency, was down 2.7% at $2,377.