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Rupee range bound, Dollar moves higher

Friday,   26-May-2023   09:50 AM (IST)

The Indian rupee opened the day at 82.7250 levels barely changed compared to its previous close at 82.74 levels amid increasing probability of another Federal Reserve rate hike next month. Expectations of intervention by RBI has capped the USDINR pair around 83.00 levels. On the other hand, investment and portfolio inflows have ensured that the rupee remains largely range bound in the wake of the upbeat dollar. Indian government bond yields rose in morning trade today as traders await debt supply, with no respite from rising U.S. yields. Benchmark 10-year yield was trading at 7.0202% vs 7.0068% at previous close. Indian stock market opened higher on improved global cues, after witnessing high volatility in the previous session. At 9:45 AM, the S&P BSE Sensex was trading at 62,099.21 up 226.59 points (+0.37%), while the broader Nifty50 was at 18380.25 up 59.10 points (+0.32%). As per the technical indicators range for the USDINR pair may be 82.50-82.90 levels. Rupee has an immediate support at 82.78 levels. A breach of the same may see rupee at 82.84 followed by 82.91 levels. On the positive side rupee is likely to face resistance at 82.67 levels and if it is able to break the same then it may gain up to 82.58 levels followed by 82.45 levels.

Dollar strengthened further against its major peers to touch a two-month high, as U.S. data pointed to a resilient economy even after an aggressive rate hike cycle by the Federal Reserve, on expectations that U.S. interest rates could remain higher for longer than initially expected. The dollar index rose 0.433% at 104.280 after hitting 104.31, its highest since March 17. Jitters over debt ceiling negotiations between U.S. President Joe Biden and top congressional Republican Kevin McCarthy also continued to cast a shadow over market sentiment, with just a week to go before the so-called "X-date" on June 1, when the government would be unable to cover its obligations. Fitch put the United States' "AAA" debt ratings on negative watch, a precursor to a possible downgrade should lawmakers fail to reach an agreement. The Treasury has warned it will be unable to pay all its bills on June 1 if the limit is not increased. Data released on Thursday showed that the number of Americans filing new claims for unemployment benefits increased moderately last week by 4,000 jobless claims to 229,000, lower than expectations. While data from the prior week was revised sharply lower, an indication the labor shows little signs of cracking. Meanwhile, the German economy was in recession in early 2023 after household spending in Europe's economic engine finally succumbed to the pressure of high inflation. GDP fell by 0.3% in the first quarter of the year when adjusted for price and calendar effects, a second estimate from the statistics office showed on Thursday. Euro was weighed down by this news. Oil prices retreated in Asian trade on Friday, extending a sharp drop from the prior session as traders awaited more clarity on the OPEC’s plans for future production cuts, while concerns over the U.S. debt ceiling kept markets on edge. Fears of a new COVID-19 wave in China also weighed on sentiment, amid warnings that cases could peak by late-June. Brent is currently trading around $75.80 a barrel.