Rupee ended lower, Pound lower vs. Dollar

Thursday,   18-Aug-2022   04:09 PM (IST)

The Indian rupee ended the session lower at 79.6725/6825 levels compared to its opening at 79.60/61 levels after touching the low of 79.7150/7250 levels against a steady dollar that found support from minutes of the U.S. Federal Reserve's last meeting that hinted higher interest rates could stick for longer. Overall mood was quite sombre in Asian emerging markets as the region's economic engine China's currency continued its poor run with a 0.2% decline to a three-month low. Rupee traded in the range of 79.59-79.7150 levels today. Most Asian currencies declined as investors reviewed the minutes of July Federal Reserve meeting. Corporate dollar outflows and risk aversion on global growth fears weighs on rupee. Indian forward premiums were almost flat following the Fed minutes, with the 1-year implied yield hovering just above 3%. Traders widely expect the rupee to tread the 79-80 range for at least another week, with no major events around the corner. Indian government bond yields ended higher on Thursday, as traders lightened books after strong gains in the previous session, awaiting fresh supplies of a new 10-year bond due for auction on Friday. The benchmark S&P BSE Sensex recouped all of its losses to end at 60,298, up 38 points or 0.06%. The NSE Nifty50, too, recovered from a low of 17,852 to settle at 17,956.50, up 12 points or 0.07%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.15%, 3.06% and 2.95% respectively.

The British pound weakened against the dollar on Thursday after policy minutes from the Federal Reserve boosted the U.S. currency and traders worried soaring UK inflation would mean higher interest rates and a weaker British economy. The latest inflation figures, which were released on Wednesday and came in above 10%, increase pressure on the Bank of England (BoE) to bring down prices and also ramp up fears of a sharp economic slowdown. The pound was down 0.1% against the dollar at $1.2044 and earlier fell to $1.1996. Versus the euro, however, it edged up to 84.39 pence. British two-year government bond yields surged to their highest since November 2008 on Wednesday, and stayed close to this level on Thursday. Sterling fell 0.4% against the dollar after the inflation data release. In light of the modest sterling reaction, Cole questioned whether the prospect of higher rates was being outweighed by questions over the credibility of monetary policy longer term. Investors are fully pricing in a 50 basis point hike at the BoE's September meeting, according to data from Refinitiv, with a projected peak in the bank rate of 3.75% now seen in May 2023. Earlier this week, money markets had seen the bank rate peaking earlier in March. The Conservative Party leadership race to succeed British Prime Minister Boris Johnson remains a headwind for sterling, with frontrunner Liz Truss' spending plans and potential plans to review financial regulators under the spotlight.