Rupee ended higher, Dollar lower vs. major currencies

Thursday,   23-Mar-2023   04:27 PM (IST)

The Indian rupee ended the session higher at 82.2625/2725 levels compared to its opening at 82.3750/3850 levels after touching the high of 82.08/09 levels as Asian currencies firmed on anticipation that the U.S. Federal Reserve was near the end of its rate hiking cycle. Rupee traded in the range of 82.08-82.4025 levels today. Lack of inflows and potential dollar orders from oil companies may have pulled the rupee down from its high of 82.08 during the day. The rupee aligned itself with peers like the Chinese Yuan and the Thai baht, which rose around 0.5%, as the dollar index tumbled to a seven-week low and briefly slipped below the 102-level. Indian government bond yields are down mirroring their U.S. counterparts. Indian shares settled lower dragged by information technology stocks and financials. The S&P BSE Sensex settled at 57,925, down 289 points or 0.5%. The Nifty50 ended at 17,077, down 75 points or 0.44%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 2.90%, 2.47% and 2.38% respectively.

The dollar headed for its longest losing streak in 2-1/2 years on Thursday after the Federal Reserve sounded close to calling time on interest rate hikes, while the Swiss franc edged higher after the central bank pushed ahead with another hike. The Fed raised its benchmark funds rate by 25 basis points, as expected, but dropped language about "ongoing increases" being needed in favour of "some additional" rises, as it watches how wobbling confidence in banks affects the economy. Futures imply around a 50% chance of one more quarter-point hike, in contrast to Europe where markets see around 50 bps of further tightening. The gap has sent the euro surging to a seven-week high of $1.0930, having also risen for six straight sessions. The dollar index , which measures the currency against six major peers, was last down 0.2%, on track for its sixth straight daily drop, its longest such streak since September 2021. The Swiss National Bank raised its policy rate by 50 basis points as the central bank sought to balance tackling inflation with concerns about financial market turmoil, while it reiterated it was willing to be active in the foreign exchange market. The SNB also said measures announced by authorities at the weekend regarding Credit Suisse had "put a halt to the crisis". The franc strengthened after the decision and was last up 0.2% against the dollar at 0.9155. Sterling also hovered near a seven-week high after data showed a surprise rise in British inflation on Wednesday, leaving it at 10.4% and heaping pressure on the Bank of England to raise rates and sound hawkish at its meeting later on. Markets have priced in a 25-bp hike from the BoE. Two-year U.S. Treasury yields fell 2 bps, extending a drop of about 20 bps on Wednesday. Financial markets have been roiled by wavering confidence in banks globally following a run on Silicon Valley Bank two weeks ago and the sudden demise of Credit Suisse. The focus on the banking front is now primarily on U.S. regional lenders where worry of a contagious run on deposits remains elevated. Fed Chair Jerome Powell said deposit flows have stabilised in the last week, and smaller lenders said they took some comfort from U.S. Treasury Secretary Janet Yellen's remarks that deposit insurance would be considered were there to be a contagion risk.