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Rupee ended lower, Dollar steady vs. major currencies

Monday,   15-Apr-2024   04:08 PM (IST)

The Indian rupee ended the session lower at 83.45/46 levels compared to its opening at 83.4350/4450 levels after touching the low of 83.4525/4625 levels as rising Middle East tensions weighed on Asian currencies and risk assets but potential dollar sales by the Reserve Bank of India helped curb the rupee's losses. Rupee traded in the range of 83.4275-83.4525 level today. Asian currencies were mostly lower following Iran's retaliatory attack on Israel over the weekend. The war in Gaza, which Israel invaded after an attack by Hamas on Oct. 7, has ratcheted up tensions in the region. Indian government bond yields were down as oil prices ease. Indian shares declined today as investors turned risk-averse after Iran's retaliatory attack on Israel over the weekend spurred fears of a wider regional conflict. The NSE Nifty 50 fell 1.1% to 22,272.50, while the S&P BSE Sensex lost 1.14% to 73,399.78, at close. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.06%, 1.09% and 1.25% respectively.

The dollar was steady on Monday, holding its biggest weekly gain since 2022, as the prospect of stubbornly high U.S. interest rates and escalating conflict in the Middle East gave support. The dollar rose 1.6% against a basket of six major currencies last week after a small but unnerving upside surprise in U.S. inflation cast doubt over bets on U.S. rate cuts, while European policymakers signalled a cut within a few months. The initial moves in currencies on Monday seemed to be based more on the receding Federal Reserve rate cut expectations than a weekend attack on Israel by Iran, from which the broad market reaction has been relatively muted. Iran had warned of a strike on Israel and over the weekend launched over 300 drones and missiles in retaliation for what it said was an Israeli attack on its Damascus consulate. The unprecedented drone and missile volley caused only modest damage and Iran said it now "deemed the matter concluded". The dollar index, which measures the currency against a basket of six others, was last little changed at 105.92, just below Friday's 5-1/2 month high of 106.11. The yen was the main loser on Monday, marking a 34-year low at 153.93 to the dollar. The yen's slide against the dollar has revived anticipation of currency intervention. Japanese Finance Minister Shunichi Suzuki said he was watching currency moves closely, and that Tokyo is "fully prepared" to act. The dollar stands to benefit as investors continue to slash bets on Fed cuts and push back the expected start of the easing cycle to September after Wednesday's hotter-than-expected consumer price (CPI) report. The two-year Treasury yield, which is sensitive to changes in interest rate expectations, surged past 5% on Thursday. The yield was last at 4.93%. The euro recorded its biggest weekly percentage drop since late September 2022 last week, while sterling had its largest weekly percentage drop since mid-July.