Rupee ended flat, Dollar higher vs. major currencies

Friday,   12-Aug-2022   04:17 PM (IST)

The Indian rupee traded range bound today ended the session almost flat at 79.6550/6650 levels compared to its opening at 79.67/68 levels amid a pause in the dollar's decline and importers looking to cover their near-term exposure. USD/INR futures were little changed as were forward premiums, ahead of the domestic retail inflation report. Rupee traded in the range of 79.62-79.73 levels today. Rupee ended down on week as likely one-time dollar outflows dragged the currency compared to stronger Asian peers that gained from softening U.S. inflation data. India bond yields ease from day’s high as Government borrows lower-than-scheduled quantum via debt auction, which saw strong bids. Equity markets ended mildly above the flat line as investors awaited India's retail inflation data for July. The S&P BSE Sensex closed 130 points, or 0.22 per cent, higher at 59,463. The Nifty50 closed at 17,698, up 39 points or 0.22 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.07%, 3.07% and 2.95% respectively.

The dollar edged higher in early London trading on Friday, after hawkish comments from U.S. Federal Reserve officials pushed against the idea this week’s U.S. inflation data could prompt the central bank to slow down policy tightening. The U.S. inflation data was lower than expected, boosting riskier assets such as equities and weakening the dollar, as markets interpreted it as an indication the Fed could be less aggressive in rate hikes. But Fed officials made clear they would continue to tighten monetary policy. San Francisco Federal Reserve Bank President Mary Daly said on Thursday she was open to the possibility of another 75 basis point (bp) hike in September to fight too-high inflation. The Japanese yen lost out to the dollar strength, with the dollar up 0.3% against the yen at 133.345. Traders were pricing in around a 38.5% chance of a 75 bps Fed rate hike in September and a 61.5% chance of 50 bps. The British pound was down 0.3% at $1.2175, having shown no reaction to data revealing UK GDP contracted by less than feared in June, even though an extra public holiday had been expected to cause a big drag. The euro was down 0.2% at $1.0295. French inflation was up 6.8% year-on-year in July, while for Spain the figure was 10.8%, the highest since 1984, data showed. The euro has been weighed down by Europe's struggles with the war in Ukraine, the hunt for non-Russian energy sources, and a hit to the German economy from scant rainfall. In the latest troubles, low water levels on the Rhine, Germany's commercial artery, have disrupted shipping and pushed freight costs up more than five-fold. Inflation in Sweden eased to 8% year-on-year in July, which ING's global head of markets Chris Turner said in a note to clients may lessen expectations for a massive Riksbank rate hike in September. The New Zealand dollar was lifted by expectations of a Reserve Bank of New Zealand rate rise next week.