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Rupee ended weaker, Pound falls vs. Dollar

Friday,   12-Apr-2024   04:03 PM (IST)

The Indian rupee ended the session lower at 83.4125/4225 levels compared to its opening at 83.36/37 levels after touching the low of 83.4250/4350 levels in tandem with the drop in most of its Asian peers, as the dollar extended recent gains to a nearly five-month high. Rupee traded in the range of 83.36-83.4250 level today. State-run banks were mildly selling dollars towards the close of the session. Exporters were also active during the session, helping curb the rupee's losses. Most Asian currencies declined on the day, with the Korean won down nearly 0.8% and leading losses. Meanwhile, dollar-rupee forward premiums declined, with the 1-year implied yield down 3 basis points (bps) at 1.63%, pressured by elevated U.S. bond yields. Indian government bond yields were up tracking a sharp spike in Treasury yields that have broken key upside levels. Indian equity benchmark indices fell sharply in trades today as investors preferred to book profit amid uncertainty over the US Fed rate cut timing, start of the Q4 earnings season and concerns of rising tensions between Iran and Israel. The S&P BSE Sensex settled with a loss of 793.25 points at 74,244.90. The NSE Nifty 50 ended at 22,519.40, down 234.40 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.06%, 1.13% and 1.29% respectively.

Sterling fell to a five-month low on Friday even as data showed the British economy was on course to exit its shallow recession, with all major currencies coming under pressure from a dominant dollar. The pound was down 0.48% at $1.249, the lowest since mid-November. It was heading for a weekly loss of 1.1%, after hot U.S. inflation data this week slashed Federal Reserve easing expectations, boosting U.S. bond yields and the dollar. Britain's economic output grew by 0.1% in monthly terms in February, in line with forecasts, while January's reading was revised higher, pointing to an exit from recession in early 2024. The bigger domestic news that could inform Bank of England (BoE) pricing is not due until next week in the form of inflation and labour data. Money markets are currently expecting about 52 basis points of interest rate cuts by the BoE this year and they see a 39% chance of the first cut arriving in June, according to LSEG data. That is down from around 68 bps priced in for 2024 at the start of the week, after a Financial Times article by BoE official Megan Greene, which warned about persistence in UK inflation, caused traders to reel in their bets. Yet the higher-than-expected U.S. inflation has caused markets to scale back expectations of the first Federal Reserve cut even further, with the first rate cut repriced from June to September. The euro dropped to its lowest level since mid-November on Friday after the European Central Bank signalled it could cut rates as soon as June even with a hot U.S. economy likely forcing the Federal Reserve to wait until later in the year. Meanwhile, the Japanese yen fell to a new 34-year low as the dollar continued to charge higher, leaving investors vigilant for signs of intervention from Tokyo officials.