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Rupee ended little changed, Pound higher vs. Dollar

Wednesday,   15-May-2024   04:05 PM (IST)

The Indian rupee ended the session little changed at 83.50/51 levels compared to its opening at 83.4925/5025 levels as traders awaited the U.S. consumer inflation data for cues on when the Federal Reserve may kick off rate cuts. Rupee traded in the narrow range of 83.4750-83.51 levels today. While the rupee had inched up early in the session on dollar sales from foreign banks, they were later seen bidding for dollars which weighed on the currency. Traders pointed to mild dollar sales from state-run banks, likely on behalf of the Reserve Bank of India, which helped offset pressure from dollar demand by foreign banks and importers. Outflows from Indian equities amid nervousness about the upcoming outcome of the national election have kept the rupee under pressure over recent trading sessions. Most Asian currencies rose. Meanwhile, India's merchandise trade deficit increased to $19.1 billion in April from $15.60 billion in March. Indian government bond yields were down tracking a fall in U.S. yields. Benchmark indices were extremely volatile today as investors chose to stay sidelines amid election-related nervousness. The S&P BSE Sensex ended at 72,987.03, down 117.58 points or 0.16%. The NSE Nifty50 ended at 22,200.55, down 17.30 points or 0.08%. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.18%, 1.25% and 1.36% respectively.

Sterling hit its highest level in almost two weeks versus a weakening dollar and was broadly unchanged against the euro on Wednesday ahead of key U.S. inflation data. The pound fell on Tuesday after Bank of England (BoE) chief economist Huw Pill said the central bank might be able to consider cutting interest rates over the summer. Meanwhile, British wages grew more than expected. Still, other figures suggested the labour market is losing some of its inflationary heat, keeping the BoE on alert about when to cut interest rates. Market bets on future BoE rate cuts remained roughly unchanged, discounting an around 50% chance of a first move in June while fully pricing in a 25 basis point (bps) rate cut in August and more than 50 bps by year-end. The dollar dipped to a one-month low versus the euro on Wednesday amid lower Treasury yields as traders braced for a key U.S. inflation report later in the day that could dictate the path of Federal Reserve policy. The yen edged up against the greenback but was still close to a two-week low as the yield gap between local bonds and U.S. peers continued to encourage selling of the Japanese currency.