Rupee Opens Higher As ECB Stimulus Boosts Risk Sentiment

Rupee Opens Higher As ECB Stimulus Boosts Risk Sentiment

13 Sep 2019 09:18 AM

USD/INR – The Indian rupee opened higher against the dollar after the European Central Bank cut interest rates further into negative territory and resumed asset purchases. The rupee opened at 70.9625 to a dollar compared with its previous close of 71.13. The ECB yesterday cut its deposit rate by 10 basis points to -0.5% and said that it will resume bond purchases of 20 billion euros ($22 billion) from November, which will run as long as required. The common central bank provided a dovish forward guidance, saying it expects interest rates to remain at present or lower levels until inflation robustly converges to its target of close to 2%. In addition to the ECB stimulus, risk appetite was further boosted by a report that White House officials had discussed offering a limited trade agreement to China that would delay and possibly roll back selected U.S. tariffs in exchange for Beijing promises on intellectual property and agricultural purchases.

EUR/USD – The euro gained against the dollar on Thursday after the European Central Bank launched new stimulus but failed to live up to some dovish market expectations. The ECB cut its deposit rate to a record low -0.5% from -0.4% and will restart bond purchases of 20 billion euros a month from November. It also said it expects bond purchases to run for as long as necessary and end shortly before it starts raising the key ECB interest rates. The euro gained 0.55% to $1.1.069, after initially dropping as low as $1.0925. That was the lowest since the single currency fell to $1.0924 on Sept. 3, which was the weakest in more than two years. The euro was also boosted after the ECB said that euro zone banks will be exempted from paying a penalty charge on idle cash worth six times their mandatory reserves.

GBP/USD – Sterling firmed against the dollar on the Brexit news front as investors weigh up Britain's chances of securing a divorce deal with the European Union ahead of its scheduled departure from the bloc on Oct. 31. With parliament suspended for five weeks by Prime Minister Boris Johnson -- a move judged unlawful by Scotland's highest court of appeal on Wednesday - traders lacked new Brexit developments to digest and stayed on the sidelines. The court ruling has prompted calls for lawmakers to return to work as the government and parliament battle over the future of Brexit. Britain's Supreme Court is set to make a ruling next week. Outcomes ranging from leaving without a deal to another referendum that could cancel the whole process are forcing some investors to stay away from the currency. GBP/USD was last trading at 1.2333.

USD/JPY – The dollar gained against the safe-haven Japanese yen after it was reported that Trump administration officials have discussed delaying or rolling back some tariffs on Chinese goods. Central banks globally are fighting against slowing growth and tepid inflation, with the U.S.-China trade war adding further headwinds to the global economy. U.S. President Donald Trump on Wednesday welcomed China's decision to exempt some U.S. anti-cancer drugs and other goods from its tariffs and announced a short delay to scheduled tariff hikes on billions worth of Chinese goods. The greenback was last up 0.31% at 108.14 yen. U.S. data on Thursday showed that underlying consumer prices increased solidly in August, leading to the largest annual gain in a year, but rising inflation is unlikely to deter the Federal Reserve from cutting interest rates again next week to support a slowing economy.

Currency Range for today

Currency Pair Lower Upper
USD/INR 70.75 71.25
EUR/INR 77.90 78.70
GBP/INR 87.15 87.95
JPY/INR 0.6540 0.6600

Important data releases today

Time Ccy Event Forecast Previous
6:00 PM USD Core Retail Sales (MoM) (Aug) 0.1% 1.0%
6:00 PM USD Retail Sales (MoM) (Aug) 0.2% 0.7%