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Rupee ended lower, Dollar firm vs. major currencies

Tuesday,   11-Jun-2024   04:04 PM (IST)

The Indian rupee ended the session lower at 83.5650/5750 levels compared to its opening at 83.4825/4925 levels after touching the low of 83.57/58 pressured by weakness in other Asian peers and despite intermittent dollar selling intervention by RBI in late trade. The dollar sales, however, helped cap further sharp losses. Rupee traded in the range of 83.4825-83.57 levels today. Most Asian currencies slipped, with the Korean won, down 0.2%, leading losses. Choppy trading last week due to the national election results spurred increased hedging from importers and exporters, data from a local clearing house showed.  Indian government bond yields were down amid reports that the new government will adhere to fiscal deficit target. Indian shares closed flat coming off a sharp rise last week, as investors moved on from election related news to focus on upcoming inflation data, as well as the US Federal Reserve's policy decision later in the week. The S&P BSE Sensex ended with a loss of 33.49 points at 76,456.59. The NSE Nifty 50 settled at 23,264.85, up 5.65 points. In the forward segment 1mth, 3mth and 6mth annualized premia ended the day at 1.09%, 1.11% and 1.23% respectively.

The dollar hovered near a one-month peak against the euro on Tuesday, and touched a one-week high versus the yen as traders braced for crucial U.S. inflation data and Federal Reserve interest rate forecasts. The U.S. currency was supported by higher Treasury yields in the aftermath of surprisingly robust domestic jobs data on Friday, which triggered a dramatic paring of bets for Fed rate cuts this year. The Bank of Japan will set its policy on Friday. While Investors expect a reduction in the central bank's monthly government bond purchases as early as this meeting, gaping yield differentials with the U.S. have kept the yen on the defensive. The euro was flat. It slid to as low as $1.0731 on Monday, a level last seen on May 9, after gains by the far right in European Parliament elections and French President Emmanuel Macron called a snap election. The far-right National Rally was forecast on Monday to win a snap election in France but fall short of an absolute majority in the first opinion poll published after Macron's shock decision to dissolve parliament. The Fed is widely expected to maintain status quo at the conclusion of its two-day policy meeting Wednesday, but officials will update their economic and interest rate projections. Should the Fed dot plot reflect just one expected cut for 2024, the market would see this as a hawkish signal from the committee, likely prompting another knee-jerk leg higher in the greenback, analysts argued. In this scenario, Fed chief Jerome Powell could downplay the significance of the dot plot again, in a move which could limit the dollar upside. Markets are currently pricing in only 37 basis points of cuts by December, which implies an around 50% chance of a second cut this year. Many analysts and investors expect a 1 trillion yen ($6.4 billion) drop in the BOJ's bond purchases to around 5 trillion yen per month, following media reports hinting at such a change from Reuters and other outlets. The BOJ and the Japanese government are aligned on trying to limit yen weakness from scuppering a sought-after cycle of mild inflation and steady wage increases.