Rupee ended lower, Yen higher vs. Dollar

Monday,   20-Mar-2023   04:04 PM (IST)

The Indian rupee ended the session lower at 82.6350/6450 levels compared to its opening at 82.49/50 levels after touching the low of 82.7050/7150 levels as relief from the Credit Suisse rescue deal proved to be short-lived, with investors dumping risk assets on worries over a contagion in the global financial sector. Rupee traded in the range of 82.4575-82.7050 levels today. Asian stocks and currencies deepened losses as the session progressed as investor focus shifted to the massive hit some Credit Suisse (CS) bondholders would take under the UBS takeover deal due to the write down of additional tier-1 (AT-1) capital debt. Lower U.S. bond yields supported rupee premiums, with the 1-year yield surging to 2.50% for the first time since October. Indian government bond yields down, mirroring its U.S. peers, while dipping odds of a rate hike by the Federal Reserve also led to fresh position building. Indian shares closed lower with investors fretting about contagion risks in the global banking system, as relief from a historic Swiss-backed acquisition of troubled Credit Suisse by UBS Group turned out to be short-lived. The S&P BSE Sensex fell 361 points, or 0.62%, to end at 57,629 levels, while the Nifty50 settled at 16,988, lower by 112 points or 0.65%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 3.13%, 2.53% and 2.43% respectively.

Japan's yen rallied on Monday as investors sought out safe assets after UBS' cut-price takeover of its beleaguered rival Credit Suisse failed to quell market nerves. Under the deal, holders of $17 billion of Credit Suisse additional tier-1 (AT1) bonds will be wiped out. That angered some of the holders of the debt who thought they would be better protected than shareholders and unnerved investors in other banks' AT1 bonds. The yen - long seen as a safe currency to hold at times of stress - rallied as a drop in Asian bank stocks overnight spread to Europe on Monday. The dollar slid to its lowest since Feb. 10 at 130.55 yen, and was last down 0.75% at 130.83. Europe's banking stocks index fell 3.12% in early trading. Other currencies were little changed, with most of the action taking place in stock and bond markets. The euro was down 0.11% against the dollar at $1.065, while the British pound was up 0.14% at $1.22. The dollar rose 0.31% against the Swiss franc to 0.929. As part of regulators' efforts to shore up confidence in the global banking system, central banks moved on Sunday to bolster the flow of cash around the world. The U.S. Federal Reserve offered daily currency swaps to ensure banks in Canada, Britain, Japan, Switzerland and the euro zone would have the dollars needed to operate, echoing actions taken during the COVID crisis of 2020.