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Rupee opened higher, Dollar holding gains vs. major currencies

Friday,   13-May-2022   09:51 AM (IST)

The Indian rupee opened the day higher at 77.34/35 levels compared to its previous close at 77.4150/4250 levels after jump in India’s retail inflation rate makes it highly likely RBI will again raise rates next month. India consumer price index climbs 7.79% in April, fastest in about eight years and above 7.5% expected. India's sovereign bond yields rose in early session, as retail inflation in April quickened at the fastest pace in nearly eight years, which may prompt more aggressive policy rate hikes. The benchmark BSE Sensex and the broader NSE index are trading higher tracking similar move in Asian indices and U.S. equity futures.  At 9:20 AM, the S&P BSE Sensex was trading at 53,289 up 359 point, while the broader Nifty50 was at 15,935 up 127 point. As per the technical indicators range for the USDINR pair may be 77.00-77.60 levels. Rupee has an immediate support at 77.42 levels. A breach of the same may see rupee at 77.53 followed by 77.68 levels. On the positive side rupee is likely to face resistance at 77.23 levels and if it is able to break the same then it may gain up to 77.08 levels followed by 76.90 levels.

Dollar climbed to a 20-year high as concerns persisted that central bank actions to counter high inflation would crimp global economic growth, boosting the dollar's safe-haven appeal. Meanwhile, U.S. Treasury Secretary Janet Yellen told a U.S. House of Representatives Financial Services Committee hearing that the Fed can bring down inflation without causing a recession because of a strong U.S. job market and household balance sheets, low debt costs and a strong banking sector. The yen held most of its overnight gains on Friday, after falling U.S. yields and market jitters propped up the Japanese currency while another Wall Street selloff drove flight-so-safety bid to dollar, which remains near 20-year high peaks. The yen was at 128.97 per dollar on Friday morning, softening on the day after it had reached a two-week peak of 127.5 overnight. Thursday’s 1.2% decline for dollar/yen was its biggest daily percentage fall this year. The euro/yen cross declined 2.5%, its biggest daily percentage fall since 2016 as the common currency a victim of the “risk off” mood. The benchmark U.S. 10-year yield was 2.8822% having declined each session this week from Monday’s high of 3.203%. Rising U.S. yields at a time when the Bank of Japan was intervening to keep Japanese benchmark yields pinned down caused the yen to soften this year. Investors are continuing to move towards safe-haven assets fearing central bank rate hikes to constrain inflation could hit global economic growth while MSCI’s gauge of stocks around the world fell to its lowest level overnight since November 2020. After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors are assessing how aggressive the central bank policy path will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch Tool. The euro was at $1.038 approaching its 2017 low of $1.034. A break past that would be its lowest in nearly 20 years. The weak euro kept the dollar index at 104.75, just off its overnight 20-year peak of 104.92. Sterling hunkered down at $1.2206, and the Aussie dollar was also bruised at $0.6887.