Rupee Opens Lower On Profit Taking; Fed In Focus

Rupee Opens Lower On Profit Taking; Fed In Focus

20 Mar 2019 09:15 AM

USD/INR – The Indian rupee is expected to decline against the U.S. currency amid trimming of dollar short positions after yesterday’s turnaround. The rupee opened at 69.05 against the dollar compared with its previous close of 68.9675. The rupee climbed to a fresh seven-and-a-half-month high of around 68.35 yesterday, before a combination of importer demand and dollar short covering pushed the pair to near the 69 level. Yesterday’s decline on the rupee was the biggest since early-February and halted a six-day winning run. Meanwhile, the dollar index edged higher on Wednesday ahead of the Federal Reserve outcome. The Fed is expected to cut its interest rate projections for the current year to one from December meeting’s two and formally announce that they intend to halt the balance sheet runoff.

EUR/USD – The euro was a shade lower at $1.1347. More positive signs were evident in Germany as a survey by the ZEW research institute indicated the mood among German investors improved more than expected in March, as a potential delay to Britain's exit from the European Union helped lift sentiment. Traders leaned on tighter Italian-German and German-U.S. yield spreads, which helped EUR/USD hit a new short-term high. The market widely expects the Fed to lower its dot plot and economic growth projections. U.S. rate markets have likely priced in those expectations as the 10-year Treasury yield hovers above the March low while EUR/USD and fed fund futures rates suggest a Fed cut is coming at the end of 2020. EUR/USD longs will need the Fed to surprise the market with a very cautious tone that would drive yields and the greenback lower for the currency pair to reach new peaks. An overly cautious tone from the Fed could counter the ECB's shift to the dovish side and would help underpin EUR/USD.

GBP/USD – Sterling was a shade lower at $1.3259. It had pared gains overnight on concerns that British Prime Minister Theresa May's request for delaying Brexit was running into complications with the European Union. GBP/USD is struggling as fears of a hard Brexit return with the clock ticking down toward Britain's March 29 EU exit deadline. The upcoming EU Summit on March 21 and Brexit deadline beyond are fraying nerves, with doubts about PM May's ability to get a deal done and the EU's willingness to grant a extension both dogging the pound. With little hope for a third vote in parliament, owing to stalled negotiation with the DUP, preparations for a hard Brexit continue.

USD/JPY – The yen gave up about one-sixth of a percent to 111.60 yen per dollar. Much of early pullback is due to broad dollar selling on expectations today’s FOMC statement economic projections and Powell's remarks would signal the committee's expectations were falling toward the market's view of no more rate hikes this year, if not yet toward a 2020 cut already partially priced in. But a steady Fed is also nurturing global risk-taking and falling volatility, making yen-funded carry trades attractive, as long as the global slowdown doesn't and force the Fed to slash rates and risk-on yen-shorts to be covered in a panic.

Currency Range for today

Currency Pair Lower Upper
USD/INR 68.80 69.30
EUR/INR 78.00 78.80
GBP/INR 91.15 91.95
JPY/INR 0.6170 0.6230

Important data releases today

Time Ccy Event Forecast Previous
3:00 PM GBP CPI (YoY) (Feb) 1.8% 1.8%
8:00 PM USD Crude Oil Inventories 0.309M -3.862M
11:30 PM USD Fed Interest Rate Decision 2.50% 2.50%


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