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Rupee ended almost flat, Dollar rose vs. major currencies

Wednesday,   31-May-2023   04:18 PM (IST)

The Indian rupee ended the session almost flat at 82.7225/7325 levels compared to its opening at 82.7125/7325 levels. Rupee traded in the range of 82.64-82.73 levels today. The rupee remained stable during the day despite a further decline in the Chinese Yuan, which pushed other Asian currencies lower and boosted the dollar. The offshore Yuan fell 0.4% to 7.1225 to the dollar, hovering near its lowest in six months, after data showed that China's factory activity contracted more than expected in May on weakening demand. Likely dollar inflows into equities over MSCI Index rebalancing helped offset the negative impact of the dollar strength. Rupee was also aided by likely dollar selling by foreign banks. Tracking the fall in U.S. treasury yields, the one-year rupee forward premium edged up to 1.79% from a low of 1.73% hit earlier this week. Focus will also be on India's GDP data due later in the day and the U.S. jobs data due on Friday. Indian government bond yields were down as U.S. yields ease further. Indian shares fell today, snapping a four-day winning streak, dragged by index heavyweight Reliance Industries and financial stocks, ahead of gross domestic product data for the March quarter due later in the day. The blue-chip Nifty 50 index lost 0.53% to 18,534.40, while the benchmark S&P BSE Sensex closed 0.55% lower at 62,622.24. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.26%, 1.35% and 1.43% respectively.

The U.S. dollar rose strongly on Wednesday to a more than two-month high after data showed European inflation is cooling quicker than expected and China's recovery is sputtering. The euro was last down 0.67% at $1.066, the lowest since March 20. That helped the dollar index, which measures the greenback against six major peers, climb 0.51% to 104.6, its highest since March 16. Data on Wednesday showed that inflation in France and some of Germany's biggest states is slowing quickly. Analysts said the figures reduced the pressure on the European Central Bank (ECB) to keep raising interest rates, diminishing the euro's attractiveness relative to the dollar. In France, inflation cooled in May to its lowest level in a year as energy and food price increases moderated. Euro zone-wide inflation data is due out tomorrow. Weak economic data out of China also boosted the U.S. currency, analysts said. A survey released on Wednesday showed that China's factory activity shrank faster than expected in May, in the latest sign that the country's recovery from COVID-19 lockdowns is faltering. The data weighed heavily on the Australian and New Zealand dollars. Australia's dollar fell to its lowest since mid-November at $0.648. Meanwhile, China's yuan also fell to its lowest since November at 7.129 per dollar. In a busy day in currency markets, the Japanese yen bounced around against the dollar. The dollar rose to a six-month peak of 140.93 on Tuesday but then fell sharply after Japan's top currency diplomat said officials "will closely watch currency market moves and respond appropriately as needed". It initially continued that fall on Wednesday but was last up very slightly at 139.83 yen. Sterling was last down 0.42% to $1.236. The Turkish lira sank to a record low of 20.75 per dollar after President Tayyip Erdogan extended his two decades in power in elections on Sunday.