Rupee ended higher, Dollar slightly up vs. major currencies

Wednesday,   25-Jan-2023   04:01 PM (IST)

The Indian rupee ended the session higher at 81.59/60 levels compared to its opening at 81.61/62 levels after touching the high of 81.50/51 levels helped by likely dollar inflows and gains in most major Asian peers. There was talk of dollar inflows related to Adani Enterprises and once again, there was good demand from importers. Adani Enterprises' follow-on public offering (FPO) opens on Friday. A tussle between buyers and sellers is likely to continue with inflows pertaining to Adani FPO on one side and the Reserve Bank of India's intervention on the other side. Rupee traded in the range of 81.50-81.7625 levels. The offshore Chinese Yuan rose to 6.7750 to the dollar and the Korean won advanced, helped by a fall in Treasury yields. The two-year U.S. yield dropped to near 4.14%. Indian government bond yields ended largely unchanged today as caution prevailed ahead of the budget announcement next week, even as Government successfully completed its first-ever sovereign green issuance. Equity markets succumbed to severe selling pressure on Wednesday led by losses in financial stocks and the monthly F&O expiry that weakened investor sentiment. The BSE Sensex slumped 774 points (1.27%) to close at 60,205. The NSE Nifty lost 226 points to close at 17,892. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.88%, 1.42% and 2.48% respectively.

The dollar ticked up on Wednesday in subdued trading as investors looked towards the Federal Reserve's policy decision next week, while the euro slipped from near a nine-month high. The euro was down 0.12% against the dollar at $1.088, just off the $1.093 level reached on Friday, which was the highest since early May. Meanwhile, the dollar was up 0.1% against the yen, at 130.28 yen per dollar, having hit an 8-month low of 127.22 on Jan. 16. A drop in global energy prices and a resulting slowdown in inflation in advanced economies has spurred speculation the U.S. Fed and other central banks might soon stop raising interest rates. Those expectations have caused the dollar index , which surged on the back of Fed rate hikes last year, to fall more than 11% from September's 20-year high of 114.78. The index was up 0.11% to 102.02 on Wednesday. Sterling fell 0.23% to $1.231. Traders broadly expect the Fed to increase rates by 25 basis points (bps) next Wednesday, a step down from a 50 bp increase in December. Before that, investors will scrutinise U.S. fourth-quarter economic growth figures, due on Thursday. Data on Tuesday showed euro zone business activity made a surprise return to modest growth in January. Expectations of further rate increases by the European Central Bank have also aided sentiment and supported the euro. In contrast, U.S. business activity contracted for the seventh straight month in January, though the downturn moderated across both the manufacturing and services sectors for the first time since September. Elsewhere, the Australian dollar surged to a more than five-month high on Wednesday after inflation data came in hotter than expected, bolstering the case for further rate increases from the Reserve Bank of Australia. The Aussie was last up 0.81% to $0.71. Meanwhile, the kiwi was down 0.32% to $0.649, after New Zealand's annual inflation of 7.2% in the fourth quarter came in below its central bank's 7.5% forecast. The U.S. dollar was little changed against its Canadian counterpart ahead of the Bank of Canada's latest rates decision on Wednesday, buying C$1.337.