Rupee ended higher, Pound up vs. Dollar

Friday,   30-Sep-2022   04:10 PM (IST)

The Indian rupee ended the session higher at 81.34/35 levels compared to its opening at 81.62/63 levels after touching the high of 81.16/17 levels after the Reserve Bank of India raised the key lending rate by an expected 50 basis points, and a Reuters report on central bank measures to stabilise the currency, boosted gains. Rupee jumped to the intraday high of 81.16/17 levels today after Reuters exclusively reported that RBI was encouraging state-run refiners to reduce dollar buying in the spot market and lean on a special credit line instead. Rupee traded in the range of 81.16-81.69 levels today. RBI raised the repo rate to 5.90%, its fourth hike in the current cycle, as India's annual inflation rate came above the central bank's target band for the eighth consecutive month in August, driven by surging food prices. Rupee had opened higher today after receiving a boost from data out late Thursday that showed that India's CAD widened less than expected in April-June, while balance of payments showed an unexpected surplus. Indian government bond yields were off early highs to trade largely unchanged after RBI's monetary policy announcement came in largely along expected lines. RBI's in-line monetary policy action lifted equities. The benchmark indices snapped their seven-day losing streak. The S&P BSE Sensex ended at 57,427, up 1,017 points or 1.8 per cent. The NSE Nifty50 ended at 17,094, up 276 points or 1.64 per cent. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.89%, 3.41% and 3.02% respectively.

The euro and the sterling hit new one-week highs on Friday, buoyed by Bank of England steps to reassure markets and hawkish signals from the European Central Bank as some calm returned to foreign exchange markets at the end of a wild week. The British currency was headed for its best week against the U.S. dollar in 2 1/2 years as the BoE waded into the debt market to buy gilts for a second day on Thursday. On Monday, the pound hit a record low after the British government's plan to slash taxes and pay for it with more borrowing rattled markets. Heated German and Dutch consumer inflation data also served as a reminder that the job of the ECB, BoE and other central banks is not done, with the figure for the wider 19-country euro zone due later on Friday. The pound touched $1.1222 early in the Asian session, taking it very close to erasing all of the precipitous losses in the aftermath of the new government's so-called mini budget last Friday. It was last at $1.1155, up 0.3%. The euro traded at $0.9837, up 0.2%, while the dollar index was unchanged but is down 2.7% from Wednesday's high. Foreign exchange volatility has surged this week as investors worry about the pace of global monetary tightening and the UK mini-budget fallout, and while nerves calmed on Friday, few analysts think it is over. Elsewhere, China's Yuan on Friday recouped all of its losses from earlier in the week after Reuters reported the central bank had told major state-owned banks to be ready to support the currency in offshore trading. The Swiss franc fell after the Swiss National Bank said it had intervened in the foreign exchange market in the second-quarter to support the currency. The franc was down versus the dollar and the euro. The dollar was down 0.2% to 144.30 yen, and has been mostly tracking sideways below the psychological 145 line since Japanese officials stepped in to conduct their first yen buying intervention since 1998 last week, when the dollar popped to a fresh 24-year peak at 145.90 yen. Japan's government will confirm later on Friday the amount it spent on the intervention, and the amount it has left in reserve for further such action.