Rupee Opens Higher Ahead Of Election Results, Fed Minutes

Rupee Opens Higher Ahead Of Election Results, Fed Minutes

22 May 2019 09:10 AM

USD/INR – The Indian rupee opened higher against the dollar ahead of the nation’s election results and the U.S. Federal Reserve’s latest meeting minutes. The rupee opened at 69.67 versus the dollar compared with its previous close of 69.71. Results of India’s federal elections will begin trickling in before local currency markets open for trading tomorrow. A clear direction may very well emerge prior to the market open, in which case, the rupee will witness a major move, depending on what the early trends indicate. Meanwhile, Asian currencies were mostly lower ahead of the minutes of the Federal Reserve’s May meeting. After the monetary policy review, the U.S. central bank left interest rates unchanged and maintained its patience stance in the face of muted inflation pressures. However, Fed Chair Jerome Powell in his post policy conference remarked that the current low inflation was likely due to transitory factors, pushing back against expectations on an interest rate cut in the current year.

EUR/USD – The euro was steady at $1.1162. The single currency, which has given up 0.9% from this month's high touched on May 1, has been under pressure in recent weeks on dollar strength and due to concerns the upcoming European parliamentary elections may see euroskeptic parties faring well. EUR/USD plumbed a new 7-day low after briefly dipping below 1.1150 but bears are still struggling to gain traction. Downside misses to today's U.S. data reports have eroded some gains for U.S. Treasury yields especially at the longer-end of the curve. Meanwhile, German Bund yields have rallied, tightening 10-year German-U.S. spreads a bit near recent tights. Traders are keeping their powder dry ahead of EU elections, which begin Thursday, as well as May euro zone PMIs also on Thursday. Despite uncertainty in the upcoming election EUR/USD price action after the results could be muted.

GBP/USD – The pound was at $1.2713, hovering near a four-month low of $1.2685 touched overnight. It briefly rose overnight after Prime Minister Theresa May set out a "new deal" for Britain's departure from the EU, offering sweeteners to Parliament including the chance to vote on whether to hold a second referendum to try to break the impasse over Brexit. Yet traders doubted that a fractious Parliament would have to back any new referendum. Three years since a 52-48% referendum vote in favour of leaving the European Union and almost two months after the planned exit date, May is mounting a last bid to try to get a deeply divided parliament to ratify her divorce deal with Brussels.

USD/JPY – Against the yen, the dollar was largely steady at 110.55 yen, having hit a two-week high of 110.675 during the previous session. The greenback has recovered 1.4% from a three-month trough of 109.02 yen touched on Monday last week. Japan's exports fell 2.4% in April from a year earlier, down for a fifth straight month, in a sign of weakness in external demand, finance ministry data showed, compared with a 1.8% decrease expected. Markets have a more risk-on feel after the U.S. temporarily eased some of its restrictions on Huawei and as Chinese markets hold up. U.S. yields have bounced from recent lows and the Nikkei, which has a strong correlation to USD/JPY, looks to be heading higher too.

Currency Range for today

Currency Pair Lower Upper
USD/INR 69.55 70.15
EUR/INR 77.40 78.20
GBP/INR 88.30 89.10
JPY/INR 0.6275 0.6335

Important data releases today

Time Ccy Event Forecast Previous
2:00 PM GBP CPI (YoY) (Apr) 2.2% 1.9%


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