Tag: higher

Rupee ends 47 paise higher against the dollar on Wednesday

Banking & Finance

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The rupee ended 47 paise stronger on Wednesday due to dollar inflows in the backdrop of foreign portfolio investors eyeing investments in public offerings by Indian companies and due to the weakening of the greenback.

The Indian unit closed at 74.88 per dollar against the previous close of 75.35.

In intraday trade, the rupee saw a high of 74.83 to the dollar and a low of 75.1350.

Dollar index falls

IFA Global, in a report, observed that the rupee rose against the dollar because the dollar index remained weak and risk sentiment improved with a rise in equities globally.

“The dollar weakened because rising inflation amid a surge in energy prices in global economies is expected to push central bankers for a quick monetary policy tightening that may outpace the US Fed’s. Brent crude oil prices eased a bit and fell below the $85-per-barrel mark, which provided further relief to the domestic currency,” the report said.

However, a sharp rise in the yield on the 10-year benchmark US Treasury note limited any sharp gains in the rupee.

Anindya Banerjee, DVP, Kotak Securities, noted that the rupee appreciated on the back of a sharp rally in Chinese currency and fall in the US Dollar index.

“With oil prices holding steady at around 85 dollars a barrel, rupee has become a major underperformer in the Asian basket. There is scope for the currency to gain further ground, especially if the US Dollar index remains weak and global equity markets maintain the risk on-trend,” Banerjee said.

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Bond yields trend higher despite softer inflation

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Benchmark yield closed marginally higher this week despite positive inflation data even as rising crude prices, higher US treasury yields and domestic liquidity factor take precedence.

During the monetary policy, the Reserve Bank of India (RBI) halted the G-SAP programme while saying it would increase the quantum of VRRR auctions to Rs6 lakh crore by December.

The central bank last week conducted an 8-day Variable Rate Reverse Repo auction in which the cut-off yield came in at 3.9 per cent. In comparision, the cut-off for a 7-day VRRR auction had come in at 3.61 per cent in the first week of October. The increasing cut-off seems to reflect the central bank’s comfort in paying a higher rate to remove excessive liquidity.

On the positive side, retail inflation dropped to a five-month low of 4.35 per cent in September. Bond market participants are of the view that the next inflation print will most likely come in below 4 per cent due to a favourable base effect. Post that, there could be some rise in inflation, they say.

However, it seems the days when market cheered this sort of news seem to be over, at least temporarily so, as other factors weigh heavily on traders’ minds.

Rising crude price

The halting of G-SAP comes at a time when crude prices are gaining an upward momentum. Brent crude prices closed near the $85-mark last week, having risen by almost $2.5 in a week. To give a context, it has risen by almost $7 / barrel since the beginning of the month.

At the same time, the 10-year US treasury yield touched 1.63 per cent last week, before cooling to 1.575 per cent.

Bond dealers say if both the crude and the US treasury yields continue to rise, it could have an impact on the domestic yields.

Vijay Sharma, senior executive vice-president at PNB Gilts opines that the market is mainly looking at only these two factors.

“Rising crude prices and hardening US Treasury yields are the main factors that are driving the G-Sec yields higher. Under these adverse global conditions, the withdrawal of G-SAP has exacerbated the upmove. The market already knows that the next inflation print would likely come in below 4 per cent given the low base effect. Market participants will be watching out whether at 6.35-6.4 per cent levels, will the RBI do something to stabilise the yields. If crude prices and US treasury yields stabilise, the benchmark bonds could find demand returning at close to 6.4 per cent,” Sharma said.

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Rupee inches 8 paise higher to 73.75 against US dollar in early trade

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The Indian rupee appreciated 8 paise to 73.75 against the US dollar in opening trade on Tuesday, tracking positive domestic equities.

Forex traders said rupee is trading in a narrow range as weakness of Asian currencies, firm crude oil prices and strong dollar weighed on the domestic unit.

At the interbank foreign exchange, the rupee opened at 73.79 against the dollar, then edged higher to 73.75, up 8 paise over its previous close.

On Monday, the rupee had settled at 73.83 against the US dollar.

Dolla index rises

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.06 per cent to 93.44.

The Indian rupee opened on a flat note this Tuesday morning against the dollar, tracking the strength of the greenback and strong crude oil prices, Reliance Securities said in a research note.

Moreover, most emerging market and Asian currencies have started weaker this Tuesday morning and will weigh on sentiments, the note added.

Meanwhile, foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth ₹594.63 crore, as per exchange data.

On the domestic equity market front, the BSE Sensex was trading 16.19 points or 0.03 per cent higher at 60,094.07, while the broader NSE Nifty advanced 24.75 points or 0.14 per cent to 17,879.85.

Meanwhile, global oil benchmark Brent crude futures rose 0.79 per cent to $80.16 per barrel.

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