Rupee Opens Lower On Rising Treasury Yields

Rupee Opens Lower On Rising Treasury Yields

11 Sep 2019 09:14 AM

USD/INR – The Indian rupee opened lower against the dollar, tracking the decline in most Asian currencies after long-term U.S. yields climbed to a one-month high. Worries over crude oil prices are further expected to weigh on demand for the rupee. The rupee, resuming trade after yesterday’s market holiday, opened at 71.84 compared with its previous close of 71.70. Asian currencies were mostly lower on Wednesday after the 10-year Treasury yield closed above 1.70% for the first time in a month. The return on the 10-year German and Japanese bond, too, was hovering at its highest in a month. The rise in yields across major economies comes amid better risk appetite on optimism over U.S.-China trade negotiations. China last week said that both countries will resume talks next month. Further, the South China Morning Post reported yesterday that China is expected to buy more agricultural products in hope for a better trade deal.

EUR/USD – The euro, which has shed 3% since June, was flat at $1.1047. Overhanging the relief buying, however, are signs of a slowdown in global demand, which have offset recent positive developments in U.S.-China trade negotiations. Downbeat French and Italian July industrial order results along with a downward revision to Italy's June results have had only a minimal downside effect on EUR/USD and bond yields. French, Italian and German government yields are higher on the day while EUR/USD is down only marginally.  The lack of EUR/USD downside suggests investors could be growing comfortable with being long. Investors might also be focused on increasing doubts on the ECB introducing new QE as well as possible German government fiscal stimulus.

GBP/USD – Sterling was stable as investors kept their hands off the British currency given that the risk of Britain crashing out of the European Union without a divorce deal on Oct. 31 remained high. The probability of a no-deal Brexit was still very much a concern for traders as Prime Minister Boris Johnson reiterated that he will take the country out of the bloc on deadline. Even though the British parliament approved a legislature which forces Johnson to request a deadline extension from Brussels if he cannot agree on a deal with the EU by mid-October, the prime minister said he would not do such a thing. Johnson's senior adviser Dominic Cummings said the United Kingdom will leave the EU on time and reporters should get outside London and speak to people who are not "rich Remainers". Sterling was flat at $1.2353, having jumped to a six-week high the day before.

USD/JPY – Fragile investor confidence supported the dollar and weakened the yen on Wednesday but currency markets kept to tight ranges ahead of series of major central bank meetings over the next week. Investor focus for now is centered on the European Central Bank's meeting on Thursday, which is expected to push interest rates even further into negative territory. The ECB could set the tone for upcoming rate-setting decisions by the U.S. Federal Reserve and the Bank of Japan next week, and for the broader global risk appetite. For now, a cautious risk-on mood has prevailed after political crises that had hobbled markets, from Britain to Hong Kong, abated, taking the shine off safe-haven assets. Overhanging the relief buying, however, are signs of a slowdown in global demand, which have offset recent positive developments in U.S.-China trade negotiations. USD/JPY was last trading at 107.70.

Currency Range for today

Currency Pair Lower Upper
USD/INR 71.50 72.00
EUR/INR 78.90 79.70
GBP/INR 88.25 89.05
JPY/INR 0.6645 0.6705

Important data releases today

Time Ccy Event Forecast Previous
6:00 PM USD PPI (MoM) (Aug) 0.1% 0.2%
8:30 PM USD Crude Oil Inventories -2.600M -4.771M