Rupee ended lower, Euro and Pound higher vs. Dollar

Monday,   05-Dec-2022   04:07 PM (IST)

The Indian rupee ended the session lower at 81.79/80 levels compared to its opening at 81.23/24 levels after touching the low of 81.8350/8450 levels weighed by dollar demand from oil companies and other importers, alongside stop losses, while far forward premiums dropped. Rupee traded in the range of 81.23-81.8350 levels. The rupee opened on a positive note but did not last beyond the first half an hour of trade. Unable to capitalise on a further rally in Asian peers, rupee remained under pressure. Compared to the rupee's decline, the onshore Chinese Yuan jumped 1.4% to the dollar on easing COVID-19 restrictions. Most other Asian currencies followed the Yuan higher. Meanwhile, rupee far forward premiums fell and near premiums rose. Interbank buy/sell swaps ahead of the Reserve Bank of India's policy decision on Wednesday alongside an uptick in U.S. rates pulled far forwards lower. Near forwards, in contrast to far premiums, dropped. Indian government bond yields ended largely unchanged as traders waited for domestic monetary policy decision due later in the week, which analysts said was mostly priced into the market. Equity markets swung between gains and losses today as investors awaited outcomes of the Reserve Bank of India's monetary policy decision and Assembly elections of Gujarat and Himachal Pradesh, due later this week. The S&P BSE Sensex closed at 62,835, down 34 points or 0.05%. The Nifty50 closed at 18,701, up 5 points or 0.03%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.69%, 1.74% and 1.87% respectively. 

The euro and pound hit over five-month highs against the dollar in early trade on Monday as improved sentiment caused by Chinese cities easing some COVID-related restrictions helped investors justify continuing their shift away from the greenback. Official messaging about how dangerous the virus is has softened and financial hub Shanghai and Urumqi in the far western Xinjiang region were among the cities that announced an easing of coronavirus curbs over the weekend following recent, unprecedented protests against the government's uncompromising "dynamic zero-COVID" strategy. This boosted China's Yuan, and the dollar fell below 7.0 Yuan in offshore trade for the first time since mid-September, and lost 1.36% on the onshore Yuan to as low as 6.9473 on Monday, its weakest since Sept. 13. The consequent optimism also helped European currencies to rally against the safe haven greenback. The euro hit $1.0585 in Asian hours, its highest since June 28, and sterling hit $1.2345, its highest since June 17. Both currencies gave back those gains by London trading and the European common currency was flat at $1.0546 and the pound down 0.1% at $1.2268. China is soon set to announce a nationwide easing of testing requirements as well as allowing positive cases and close contacts to isolate at home under certain conditions, people familiar with the matter told Reuters last week. Much of the dollar's recent weakness has also been driven by expectations the Federal Reserve will be less aggressive when it comes to further monetary tightening having raised rates by 75 basis points at each of its last four meetings. The dollar index, which measures the currency against six major peers including the yen and euro, hit 104.1 in early trading Monday, its lowest since June 28. The index fell 1.4% last week, and 5% in November, its worst month since 2010. The Japanese yen, which has been one of the greatest beneficiaries of the weaker dollar in the past month was on the back foot on Monday, with the dollar up 0.7% to 135.29 yen.