Rupee ended lower, Dollar higher vs. major currencies

Tuesday,   16-Apr-2024   04:05 PM (IST)

The Indian rupee ended the session lower at 83.5350/5450 levels compared to its opening at 83.51/52 levels after touching the record low of 83.5475/5575 levels as rising geopolitical tensions in the Middle East and worries that the Federal Reserve will delay interest rate cuts triggered a selloff in risky assets. Rupee hit a lifetime low of 83.5475 today but averted further losses on likely intervention by RBI through state-run banks. Rupee traded in the range of 83.48-83.5475 level today. Concerns that Israel could retaliate to Iran's attack over the weekend hurt appetite for the rupee and other Asian currencies. Most Asian currencies dropped, with the Korean won and the Indonesian rupiah leading the losses. Indian government bond yields were up amid heightened tensions in the Middle East and worries over U.S. interest rate outlook. Indian shares extended losses to a third session in a row led by a slide in information technology stocks on receding bets of early U.S. rate cuts and worries over the conflict in the Middle East. The Nifty shed 0.56% to close at 22,147.90, while the Sensex settled 0.62% lower at 72,943.68. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.02%, 1.11% and 1.26% respectively.

The dollar rose to a five-month high against major peer currencies on Tuesday following hotter-than-expected U.S. retail sales figures, raising worries of an intervention from Tokyo as the yen languished at its lowest since 1990. The Chinese yuan edged marginally lower even after GDP data for China's first quarter beat expectations in a boost for policymakers trying to shore up confidence in the face of a protracted property crisis. Data on Monday showed U.S. retail sales rose 0.7% last month, compared with a 0.3% rise that economists polled by Reuters had forecast. Data for February was revised higher to show sales rebounding 0.9% for the largest gain in just over a year, much stronger than the previously reported 0.6%. The latest data has raised more questions about when the Federal Reserve could begin cutting interest rates, following robust employment gains in March and a pick-up in consumer inflation. Markets are now pricing in a 41% chance of the Fed cutting rates in July, compared with around 50% before the data, according to CME FedWatch tool. The likelihood of the first cut coming in September has bumped up to nearly 46%. Underlining the market bets, the president of the San Francisco Federal Reserve Bank, Mary Daly, said late on Monday in the United States that there is "no urgency" to cut U.S. interest rates. The U.S. dollar index touched 106.39 on Tuesday, the highest since Nov. 2. In the face of dollar strength, the yen breached 154 per dollar to its weakest in 34 years. That kept traders on high alert for yen-buying intervention from Japanese authorities. With hedge funds building up their largest bets against the currency in 17 years, a rebound in the yen could trigger a significant rally. In Tokyo, Japanese Finance Minister Shunichi Suzuki said on Tuesday he was closely watching currency moves and will take a "thorough response as needed". Sterling stayed at a five-month low versus the dollar on Tuesday, after data showed Britain's unemployment rate rose by more-than-expected. The UK unemployment rate in the three months to February rose to 4.2% from 3.9%, although the Office for National Statistics said there was still some volatility in its data as it overhauls its survey which produces the figure. Regular wages excluding bonuses grew by 6.0% compared with the same period a year earlier, easing from an increase of 6.1% in the November-to-January period. Inflation due on Wednesday will be another data point that investors will be looking at for clues on the path of the BoE's rate cuts, with markets pricing August as the most likely start date for policy easing.