Rupee weakens sharply above 79.60, Fed minutes after tracking sell-off in riskier assets

Rupee weakens sharply above 79.60, Fed minutes after tracking sell-off in riskier assets

Rupee weakens above 79.60 per dollar

The rupee weakened sharply early on Thursday, tracking a sell-off in riskier assets and turning on the dollar front, minutes after the Federal Reserve’s July meeting expected to stay longer to tame inflation. pointed to.

According to PTI, at the interbank foreign exchange, the rupee opened at 79.60, then fell to 79.68, registering a decline of 23 paise over the previous close.

On Wednesday, the rupee gained 29 paise to close at 79.45 against the dollar.

Indian equity benchmarks started on the backfoot on Thursday, breaking a long winning streak after disappointing global cues pointing to higher risk from trades.

But the rupee’s loss was limited by the fall in global crude oil prices.

Oil prices edged lower on Thursday, reversed from the previous session, with rising output from Russia and concerns of a possible global recession weighing on futures.

Brent crude futures fell 33 cents, or 0.4 per cent, to $93.32 a barrel. US crude futures fell 40 cents, or 0.5 per cent, to $87.71 a barrel.

Prices rose over 1 per cent during the previous session, although Brent touched its lowest level since February.

Futures have tumbled over the past few months, as investors stared at economic data, raising concerns about a possible slowdown that could hurt energy demand.

“The higher dollar index is offset by lower oil prices, while India’s 10-year bond yields have risen keeping the rupee in a narrow range,” Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors, told PTI.

A trader at a private sector bank told Reuters, “The dollar is likely to move higher due to the fall in demand (on USD/INR)”. He noted that the dollar has found “very good support” at the 79.20-79.30 level this week.

Traders will be monitoring potential dollar outflows associated with a private equity deal announced earlier this week.

The dollar climbed 0.6 percent on the yen overnight and stood at 134.90 yen on Thursday. The euro bought $1.0184. The US dollar index was steady at 106.570.

The Greenback made the most of the gains against the Antipodeans, especially the Australians. The New Zealand dollar also fell, plunging nearly 1 percent to dampen an initial surge after the central bank raised interest rates and accelerated its projected rate-hike track.

The greenback rose against the yen and sterling and was stable on the euro.

“The big picture for the dollar is that it is in a strong uptrend,” said Matt Simpson, a senior analyst at brokerage City Index in Brisbane.

β€œIn some ways, the bulls are looking to back down and I think the Fed minutes gave them a reason to do so.”

Federal Reserve officials saw “little evidence” late last month that US inflationary pressures were easing, the minutes showed. The minutes signaled an eventual slowdown in rising momentum, but did not switch to the 2023 cut that traders had recently priced interest-rate futures on.

“Once a sufficiently restrictive level is reached, they will remain at that level for some time,” Philippe Mare, strategist at Rabobank, said in a note to clients.

“This is clearly in contrast to the early Fed pivot in which the market is pricing.”

Traders estimate there is a 36 percent chance the Fed will raise interest rates by 75 basis points for the third time in a row in September. They also predict that rates will peak at around 3.7 percent in March and then remain in place through the end of 2023.

Sterling also slipped overnight after investor concerns on bearish risks focused double-digit inflation.

Britain’s consumer price inflation rose to 10.1 per cent in July, the highest since February 1982, official figures show, and sterling fell 0.4 per cent to $1.22,050 after a brief blip.


Indian Lekhak

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