Rupee Opens Higher As Fed Forecasts No Rate Hikes In 2019

Rupee Opens Higher As Fed Forecasts No Rate Hikes In 2019

22 Mar 2019 09:36 AM

USD/INR – The Indian rupee opened higher against the dollar, as the U.S. Federal Reserve unexpectedly projected a pause in its monetary tightening cycle for 2019 amid signs of a global economic slowdown. The rupee opened at 68.64 to a dollar versus its previous close of 68.82.  Indian financial markets were shut yesterday for a local holiday. The dollar index slipped 0.6% on Mar. 20, after a surprisingly dovish Fed monetary policy. The U.S. central bank kept key policy rates unchanged on Wednesday and said it would halt the slow decline of its balance sheet in September. However, a larger-than-expected decline in U.S. initial claims for jobless benefits and a sharp rebound in mid-Atlantic factory activity data amid uncertainty surrounding Brexit lifted the dollar index yesterday from its near two-month lows.

EUR/USD – The euro was a tad lower at $1.1375, extending losses into a second session after dipping one-third of a percent overnight. EUR/USD is giving back some of its Fed-inspired gains and might surrender a bit more, but it's likely to start heading toward new peaks after this period of consolidation runs its course. Sliding Bund yields, which have widened German-U.S. spreads, are to blame for EUR/USD losses. The Fed's far more dovish than expected stance sent the greenback and Treasury yields lower but EUR/USD longs were disappointed by the lack of upside follow through. Dollar recoveries are likely to be limited and longs will look to exit as interest rate futures prices are buoyed. EUR/USD downside should be limited as euro shorts cover.

 GBP/USD – Sterling rose one-sixth of a percent to $1.3136. It had retraced sharp losses overnight, when it touched as low as $1.3004. Britain could leave the European Union without a Brexit deal on April 12 if lawmakers next week reject May's agreement with Brussels, EU leaders said on Thursday. They also gave the British leader an extra two months, until May 22, to leave if she wins next week's vote in parliament. The Bank of England kept interest rates steady on Thursday and said most businesses felt as ready as they could be for a no-deal Brexit.

USD/JPY – Against the Japanese yen, the dollar was a shade lower at 110.76 yen, staying well away from the 111-level last breached before the Fed's rate announcement. Figures on Friday showed Japan's core consumer prices rose 0.7% in February from a year earlier, slowing from the previous month's pace. The data underlines the fragile nature of Japan's economic recovery, as escalating U.S.-China trade frictions and slowing. Chinese growth weighs on exports and business sentiment. If the weakness persists, the Bank of Japan (BOJ) may be forced to cut its inflation forecasts again at next month's rate review, analysts say, though policymakers are wary of expanding an already massive stimulus programme any time soon.

Currency Range for today

Currency Pair Lower Upper
USD/INR 68.40 68.90
EUR/INR 77.70 78.50
GBP/INR 89.75 90.55
JPY/INR 0.6175 0.6235

Important data releases today

Time Ccy Event Forecast Previous
2:00 PM EUR German Manufacturing PMI (Mar) 48.0 47.6
7:30 PM USD Existing Home Sales (Feb) 5.10M 4.94M

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