Rupee ended lower, Dollar edges up vs. major currencies

Friday,   27-Jan-2023   04:05 PM (IST)

The Indian rupee ended the session lower at 81.5225/5325 levels compared to its opening at 81.48/49 levels after touching the low of 81.6650/6750 levels as local equities sank, while the dollar index edged higher after U.S. economic data kept up rate hike hopes. Custodial banks were buying dollars likely on behalf of their clients. There were also fix-related dollar demand. Rupee traded in the range of 81.48-81.6650 levels. Indian government bond yields jumped today with the benchmark yield ending at its highest level in three months, after debt auction added to the supply in an already crowded market. Equity markets buckled under severe selling pressure to close at 3-month lows on Friday driven by an extended slump in Adani group stocks that soured overall market sentiment. The BSE Sensex closed at 59,331, down 874 points. The NSE Nifty dropped to 17,604 with a massive loss of 288 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.88%, 2.58% and 2.44% respectively.

The dollar edged up on Friday to pull away from multi-month lows against the euro and sterling, as investors began to train their sights on a slew of major central bank meetings next week. The U.S. Federal Reserve, European Central Bank and Bank of England are all due to make rate decisions next week as they judge what policy adjustments may be required in their battle with rampant inflation against a tough global economic backdrop. Currency analysts said they did not expect big moves to end the week, with a key U.S. jobs report also in sight next Friday. The dollar index, which measures it against six major currencies, gained 0.1% to 101.870, as the dollar moved away from near a nine-month low to the euro and a seven-month trough to sterling. The euro was last down 0.1% versus the dollar at $1.08835, while sterling was down 0.3% at $1.23735. The yen, meanwhile, rose against the dollar as heated Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan (BOJ) could be in the offing. The dollar lost 0.3% to 129.900 yen after data showed consumer price inflation in Japan's capital accelerated to a nearly 42-year peak this month, piling pressure on the BOJ to step away from stimulus. Traders broadly expect the Federal Reserve to increase interest rates by 25 basis points (bps) on Wednesday, a step down from a 50 bps increase in December . Meanwhile, the ECB has all but committed to raising its key rate by half a percentage point the following day. The Bank of England faces a challenge in controlling inflation without damaging an economy already in recession. The bank will make its next policy decision on Thursday, and is seen increasing by a half point.