Hindustan Times ST (Mumbai) - Live
Rupee surrenders half of last week’s rally, premiums plunge
The rupee fell each day this week, except for a slight upward move on Tuesday
MUMBAI: The rupee slid on Friday, extending its losses for the week, while rupee premiums fell to their lowest level in more than a decade.
The rupee declined to 81.6850 from 81.65 in the previous session, taking its losses for the week to 1.1%. The currency fell each day this week, except for a slight uptick on Tuesday.
It was very different for the rupee last week when the currency surged about 2%, helped by US inflation data.
Asian currencies struggled because of comments by US Federal Reserve officials that were broadly consistent in the message that the country’s rates need to rise further.
One official said on Thursday that rates may need to rise to 5%-7% to bring down inflation. The Fed policy rate now is 3.75-4.00%.
Near-maturity treasury yields rose this week with the 2-year back above 4.50%. Asian currencies posted declines between 0.5% and 2% week-on-week.
Cash dollar demand was another reason traders cited for the rupee’s struggles this week. The one-day USD/INR cashswap rate fell to 0.36 paisa at one point, likely because of the cash dollar demand, traders said.
The fall in the cash-swap rate pulled rupee premiums down. The unwinding of onshore and offshore arbitrage positions added to the downward move on premiums.
The 1-year USD/INR implied yield declined to near 2.20%, the lowest level in more than 10 years.
The fall in the premiums is likely to put pressure on the rupee, said Arnob Biswas, head, FX research, at SMC Global Securities.
The fall in premiums lowers the cost of hedging forward dollar liabilities.
Meanwhile, the Sensex and Nifty stayed on the back foot for the second straight session on Friday as investors offloaded auto, finance, and energy stocks amid a lacklustre trend in global markets.
After tumbling more than 400 points during the session, the 30-share BSE Sensex recouped most of the losses to end 87.12 points or 0.14% lower at 61,663.48.
The broader NSE Nifty dipped 36.25 points or 0.20% to end at 18,307.65.
Mahindra & Mahindra was the top laggard among Sensex constituents, shedding 2.46%, followed by Maruti, Bajaj Finance, IndusInd Bank, NTPC, Bharti Airtel, ITC, and Wipro.
Hindustan Unilever, Asian Paints, HCL Technologies, State Bank of India, Kotak Mahindra Bank, and Infosys were among the winners, rising as much as 0.99%.
The market breadth was negative, with 20 of the 30 Sensex stocks closing in the red.
“The domestic market is now focusing on the global trend for future direction because of lack of domestic triggers. Negative vibes in developed market and aggressive comments from Fed officials have shaken the ongoing optimistic trend across the globe,” according to Vinod Nair, head of research at Geojit Financial Services.
“Despite a late recovery attempt, the domestic market largely traded with a negative shade in all sectors except PSU banks,” Nair said.
On a weekly basis, the Sensex dipped 131.56 points or 0.21%, while the Nifty declined 42.05 points or 0.22%.
“The volatility index is at a 1-year low and at comfortable levels, which is supporting the positive sentiments,” said Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services Ltd.
In the broader market, the BSE smallcap gauge dipped 0.45% and midcap index lost 0.44% in Friday’s session.
Among sectoral indices, auto fell by 1.23%, oil and gas declined 0.73%, energy 0.73%, consumer discretionary 0.63%, and power 0.56%.
Only realty and bankex ended marginally higher.
Markets in Tokyo, Shanghai and Hong Kong ended lower, while Seoul settled in the green.
Equity exchanges in Europe were trading in the positive territory in the afternoon session. Wall Street had ended lower on Thursday.
International oil benchmark Brent crude was trading 0.40 per cent higher at USD 90.09 per barrel.
Foreign institutional Investors turned buyers as they bought shares worth a net ₹618.37 crore on Thursday, according to exchange data.