Rupee opened higher, Dollar range bound vs. major currencies

Monday,   18-Sep-2023   10:05 AM (IST)

The Indian rupee opened the day higher at 83.09/10 levels compared to its previous close at 83.1850/1950 levels with expectations around intervention by the central bank offsetting concerns over elevated crude oil prices and a widening trade deficit. The rupee sold off in the last half hour of Friday's session, which traders attributed to the trade deficit data and position adjustment heading into the weekend. India's merchandise trade deficit in August was $24.16 billion, higher than the expected $21 billion. Indian government bond yields a tad higher in early session today as U.S. counterparts remain around toppish levels. India's benchmark stock indexes fell led by losses in IT companies and heavyweight Reliance Industries, as caution prevailed ahead of a key U.S. Federal Reserve policy meeting later this week. At 9:37 AM, the S&P BSE Sensex was trading at 67,691 down 148 points, while the broader Nifty50 was at 20,154 down 38 points. As per the technical indicators range for the USDINR pair may be 82.90-83.25 levels. Rupee has an immediate support at 83.18 levels. A breach of the same may see rupee at 83.24 followed by 83.31 levels. On the positive side rupee is likely to face resistance at 83.04 levels and if it is able to break the same then it may gain up to 82.91 levels followed by 82.84 levels.

Dollar is range bound in the start of the week packed with central bank meetings. This week, investors will be keeping a keen eye on central bank decisions, beginning with the U.S. Federal Reserve on Wednesday, followed by the Bank of England of Thursday and Bank of Japan on Friday. The Bank of Japan's policy meeting on Friday is the highlight of the week in Asia, after Governor Kazuo Ueda stoked speculation of an imminent move away from ultra-loose policy. In a week packed with central bank meetings, decisions are also due from the U.S. Federal Reserve on Wednesday and Bank of England on Thursday. The yen was flat versus the greenback at 147.82 per dollar with markets in Japan closed for a national holiday. In the week since Ueda's remarks about a early move from negative rates, it has dropped 1.3% and taken losses for 2023 to more than 11%. The dollar index was a tad lower at 105.23, with the euro up 0.11% at $1.0667. Sterling was last trading at $1.2397, up 0.06% on the day. Most investors expect divergences in economic growth and in yields will keep the dollar propped up, particularly against the euro. Sterling has slid nearly 6% against the dollar since mid-July, while the euro has dropped more than 5% as the UK labour market and economy and the euro zone economy slowed. The European Central Bank raised interest rates to 4% last week but said this hike could be its last. With Japan shut, cash Treasuries were untraded on Monday. U.S. Treasury yields have been edging higher, with the two-year above the 5% threshold and up 25 bps this month, spurred by rising government spending and the anticipation of the Fed keeping rates high for longer faces to rein in inflation that's still above target. Last week's U.S. retail sales data played a part, reducing the odds of recession even further. Futures are pricing in just a 3% chance that the Fed raises interest rates at the end of its two-day meeting next Wednesday. The Bank of England is likely to hike interest rates once again this week, and markets are already looking for a pause in a massive tightening cycle that has policymakers worried about the cooling economy. UK inflation figures for August are also due on Wednesday, just ahead of the meeting. Meanwhile, oil prices are adding a layer of complication to central banks' growth-inflation dilemmas. Oil is also on track for its biggest quarterly increase since Russia's invasion of Ukraine in the first quarter of 2022. Brent crude futures hit a 10-month high above $93 a barrel on Friday and posted a third weekly gain on supply tightness spearheaded by Saudi Arabian production cuts and some optimism around Chinese demand.