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Rupee ended at record low, Pound rose vs. Dollar

Thursday,   22-Sep-2022   04:22 PM (IST)

The Indian rupee dropped to a record low and ended the session lower at 80.86/87 levels compared to its opening at 80.2850/2950 levels as Asian currencies declined on concerns over the pace and quantum of U.S. Federal Reserve's policy tightening ahead. Rupee traded in the range of 80.2850-80.86 levels today. All through the session, the rupee remained under pressure after the Fed sprung a hawkish outlook. Traders that Reuters spoke to, were unable to confirm whether the Reserve Bank of India intervened in the spot market during the session. And, while the Fed's 75-basis-point rate was expected, financial markets were surprised by the rate forecast. The so-called dot plots indicated that the rates will reach 4.4% by the end of this year, which would mean a cumulative increase of 125 basis points over the remaining two meetings in November and December. Further, policymakers see rates rising to 4.6% by end-2023. On the back of these forecasts, Asian currencies plunged and equities declined. Indian government bond yields jumped as Fed raised interest rates and signalled more increases, likely prompting an aggressive rate hike by the Reserve Bank of India next week. Benchmark indices swung in trade as investors digested interest rate hike by Fed. Besides, the weekly F&O derivatives expiry added to the volatility. The S&P BSE Sensex closed at 59,120, down 337 points or 0.57 per cent. The NSE Nifty50 settled at 17,630, down 89 points or 0.50 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.11%, 2.97% and 2.74% respectively.

Sterling rose, after slipping to a fresh 37-year low, against a weakening U.S. dollar on Thursday ahead of a Bank of England meeting and after a slew of central banks’ rate hikes. Traders were awaiting for an expected BoE interest rate hike at 1100 GMT with money markets pricing in at least a 50-basis point increase by the BoE in the face of red-hot inflation that is just off a 40-year high. This summer, rising interest rates in Britain have provided little support to sterling amid a gloomy outlook for Britain’s economy and a cost of living crisis. Sterling was up 0.5% at $1.13255 against the weakening dollar at 0900 GMT. Against the euro, it was flat at 87.24 pence. The pound has softened 16% against the dollar this year, slipping to a fresh 37-year low in early London trading. It trimmed some of those losses as the dollar lost some grounds after Norway’s and the Swiss central banks raised interest rate, while Japan intervened in currency market to buy yen for the first time since 1998. That came after the Fed hiked interest rates on Wednesday by three-quarters of a percentage point for a third straight time and signaled that borrowing costs would keep rising this year. Versus the Swiss franc, sterling surged 1.25% to 1.1019 after the Swiss National Bank raised its policy interest rate by 0.75 percentage point on Thursday.